Restaurants changing tip procedure due to new tax law

JACKSONVILLE, Fla. – In the past, dining with large groups of people will typically get tacked on to the bill automatically, but as of today many restaurants are making that a thing of the past because of a new tax law. 

Jeffery Proctor is someone who's used to seeing gratuity added to his bill when he's out with family and friends. But that doesn't mean he likes it. 

"I'm okay with it, but I would prefer just paying the tip out myself," said Proctor. "Because they would get a lot more from me if I did it that way."

Proctor and others got the chance to do that at Mimi's Cafe Wednesday, the first day since the restaurant ditched its automatic gratuity -- which is 18 percent or more on parties over nine people.

The tip change comes as the IRS is now classifying all automatic gratuities as service charges instead of tips. That means the money would be federally taxed, and servers like Matt Khosrozadeh would see the money on payday instead of at the end of their shift. 

"The hourly wage is so small really you're not really here to make that hourly wage," said Khosrozadeh. "You're here to get the tips, and you're here to go home at the end of the day with a big pocket full of money."

That's one of the reasons Khosrozadeh is happy about the change. Some see it as a loss of a guaranteed tip, but he says its an opportunity to earn an even bigger one.

"That 18 percent is nice -- if I get a big party it used to be nice. But now hopefully I'll be getting 20 percent, 25 percent. Hopefully people will recognize impressive service," said Khosrozadeh.

Other restaurants like Texas Roadhouse is getting rid of their tip of 15 percent to parties of eight or more. Darden Restaurants, which owns Red Lobster, Olive Garden and others will also no longer add automatic gratuities for parties over eight people. 

Instead all checks will now include suggested tip amounts of 15, 18 and 20 percent regardless of party size.