For example:
Both the FLSA and the Pennsylvania Minimum Wage law provide for a "tip credit." The tip credit essentially allows a restaurant owner to rely on tips received by the employee to make up a portion of that individual's minimum wage.
...a Pennsylvania restaurant owner must use the Pennsylvania tip credit which requires him to pay a direct wage of $2.83 per hour, while relying on tips to make up the balance of the State minimum.
$2.83 per hour. Nothing to do with meals, but with the expectation that $2.83 + tips will = minimum wage. Effectively a subsidy to restaurant owners.
http://www.buteralaw.com/newsletters.asp?c=88&id=597
And in states without tip credit laws which allow owners to legally pay less than the minimum wage:
Even when they are paid the state minimum, certain classes of employees (servers and hairdressers among them) are taxed at a higher rate than minimum wage employees, under the theory that there is a large amount of unreported income that comes to these employees in the form of tips.
Servers are taxed based on a percentage of their sales, which are reported to the federal government (e.g. "Timmy made $100 this week in salary and he sold $100 this week, so that means we can assume he made $100 + an unknown percentage of those sales in tips. We will therefore tax him at the rate for people making ($100 + tips), instead of $100."
The government assumes a blanket tip rate -- when I was serving, it was 8 percent (so the calculation above for Timmy would be $100 in salary and $8 in tips -- Timmy is taxed as if he made $108, regardless of whether he actually made that $8). This blanket rate has likely changed since then; it probably went up.
Therefore, whenever you tip someone below the going rate (i.e. you stiff them), you're actually punishing them in a far greater way than you presume. It's not just the opportunity cost you're hitting them with. You're actually taking money out of their pockets.
http://ask.metafilter.com/147182/Tipping-when-waitstaff-get-paid-minimum-wage
Federal Minimum Wage
As of 2011, the federal minimum wage for wait staff is $2.13 per hour plus tips, and the general federal minimum wage rate is $7.25. If the total of your tips plus your hourly base rate do not equal at least the federal minimum of $7.25 per hour your employer must make up the difference.
In addition, your employer may not classify you as a tipped employee if you receive less than $30 in tips per month. If you do not qualify for tipped employee classification, the minimum amount your employer can pay you is $7.25 per hour.
Read more: Minimum Wage for Wait Staff | eHow.com http://www.ehow.com/info_7968577_minimum-wage-wait-staff.html#ixzz1qsAsUJqp
About 20 states have minimum wages for tipped employees that are under the federal minimum. Utah is lowest at $2.13/hr. So the employee needs to make over $5/hr in tips just to get to minimum.
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