What Is a Service Charge in Miami & Is It a Tip?

A “service charge” is an automatic fee added to a customer’s bill by a business. This practice has become increasingly common, and its application, particularly in tourist-heavy areas like Miami, often leads to questions about its purpose and how it relates to traditional tipping. This article explores the specifics of service charges in Miami, distinguishing them from gratuities and outlining the transparency requirements for businesses.

Defining the Miami Service Charge

In Miami, a service charge is a mandatory fee automatically included on a customer’s bill. Businesses implement this charge to cover operational expenses, provide stable staff wages, and sometimes to account for international tourists unfamiliar with U.S. tipping practices. This charge is prevalent across restaurants, hotels, and event venues.

Restaurants commonly apply a service charge, typically 18% to 20% of the total bill, especially for larger dining parties. These charges also appear on bills for hotel room service, banquet events, and takeout orders. This fee ensures a predictable revenue stream for staff compensation and other costs.

Distinguishing from Gratuity

A tip is a voluntary payment made by a customer, where the customer determines the amount and has the unrestricted right to decide who receives it. Conversely, a service charge is a compulsory fee imposed by the business, making it a non-discretionary part of the bill.

For tax purposes, the Internal Revenue Service (IRS) treats service charges as regular business income, not tips. If a business distributes these charges to employees, they must be processed through payroll and are subject to all applicable employment taxes, such as Social Security, Medicare, and unemployment taxes, similar to regular wages. Unlike tips, service charges retained by the business can be allocated among all staff, including kitchen personnel, hosts, and bussers, rather than solely going to the direct service provider. Unlike tips, service charges are not eligible for the FICA Tip Credit.

Due to the mandatory nature and how service charges are handled by businesses, consumers typically are not expected to leave an additional tip. However, some customers might still choose to provide an extra gratuity for exceptional service, though this is entirely optional.

Legal and Transparency Requirements

Florida Senate Bill 606, signed into law in June 2025, introduces detailed disclosure requirements for what are termed “operations charges” in public food service establishments. These new provisions are set to take effect on July 1, 2026.

Under this law, businesses must prominently disclose the amount, percentage, and purpose of any operations charge on physical or digital menus, written contracts, websites, or mobile applications. This notice must be displayed in a font size equal to or larger than that used for menu item descriptions. The customer’s bill must clearly state the operations charge amount or percentage. Receipts must feature separate lines for gratuity, the operations charge, and sales tax. These regulations apply broadly to various automatic fees, including service charges, automatic gratuities, and delivery fees.