By now you’ve heard about the 2013 tax law that affects how restaurants will report automatic gratuities on large group orders.

Some may not realize that this law also applies to pizza delivery charges–a practice that the pizzeria industry has been using for decades.

The tax, in effect, covers any service charge that is not considered a tip, but rather added on by the restaurant operator. Auto gratuities and delivery charges fall into this category because the customer has no control over them.

The IRS (full document found here) states specifically:

“Service charges added to a bill or fixed by the employer that the customer must pay, when paid to an employee, will not constitute a tip but rather constitute non-tip wages. These non-tip wages are subject to social security tax, Medicare tax, and federal income tax withholding. In addition, the employer cannot use these non-tip wages when computing the credit available to employers under section 45B of the Internal Revenue Code, because these amounts are not “tips.” Common examples of service charges (sometimes called “auto-gratuities”) in service industries are:

• Large Party Charge (restaurant),
• Bottle Service Charge (restaurant and night-club),
• Room Service Charge (hotel and resort),
• Contracted Luggage Assistance Charge (hotel and resort), and
• Mandated Delivery Charge (pizza or other retail deliveries).”

More at the IRS Restaurant Tax Center here.

How is your pizzeria handling this amendment to the tax laws? Are you changing the way you charge for delivery? How will this affect your business? Let me know in the comments.