It’s legally a gift in that they can’t compel you to tip (unless they call it a service charge and include it in the bill). It’s also, legally, income, but so is any gift as long as it’s of a size the IRS gets interested in.
My understanding is that the giver of a gift pays taxes to the IRS, but the recipient doesn’t (with many qualifiers (at most $10k/year to family?) that I don’t recommend we research or discuss, because it’s boring and irrelevant).
It’s legally a gift in that they can’t compel you to tip (unless they call it a service charge and include it in the bill). It’s also, legally, income, but so is any gift as long as it’s of a size the IRS gets interested in.
My understanding is that the giver of a gift pays taxes to the IRS, but the recipient doesn’t (with many qualifiers (at most $10k/year to family?) that I don’t recommend we research or discuss, because it’s boring and irrelevant).