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not for the benefit of the food server. Respondent agrees.
Further, respondent acknowledges that the record does not
definitively demonstrate whether “net sales” includes the service
charge.8 Respondent contends that even if net sales includes the
service charge, then, if net sales were reduced by the service
charge, the tip rate necessarily would be greater than the
determined rate. We agree with respondent. The following
example illustrates why:
Assume two guests order full continental breakfasts for $11
each and give a $5 tip. Ignoring sales tax, as we must, the
total charge is $31 ($22 breakfasts + $4 service fee + $5 tip).
If the $4 service fee is included in net sales, the tip rate is
19.2 percent ($5/$26). On the other hand, if the $4 service fee
is not included in net sales, the tip rate is greater; i.e., 22.7
percent ($5/$22).
In short, the uncertainty regarding the precise makeup of
net sales does not compromise respondent’s determination. If net
sales does not include the service charge, then petitioner is
content; if net sales does include the service charge, then the
15.4 percent tip rate is understated and a greater tip rate would
be applicable. As the foregoing example demonstrates, 19.2
percent of $26 is mathematically the same as 22.7 percent of $22.
8 It should be recalled that respondent based his analysis
on data furnished by the Las Vegas Hilton.
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