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In many states, the answer is yes, your employer may deduct credit card processing fees from your tip.

However, if you are a California employee, the employer may not deduct any part of an employee’s tip to pay credit card processing fees.

The general rule everywhere is that tips belong to employees. However, there are a number of exceptions to this rule. For example, many states allow employers to claim a “tip credit,” which means they may pay employees less than the regular minimum wage, as long as the employee earns enough in tips to make up the difference. These employers aren’t taking their employees’ tips, but they are getting to count those tips towards their own minimum wage obligations.

Most states also allow employers to require employees to share their tips, in tip sharing or pooling arrangements. This allows employers to distribute tips to employees who wouldn’t normally receive them, in effect using tips to supplement employee incomes.

In California, however, the law requires employers to pay all costs of doing business; they may not pass any of those costs on to employees. Among other things, this means employers may not charge employees for cash register shortages or broken items, unless they were due to intentional misconduct. The same rule applies to credit card processing fees. California views these fees as expenses the employer should have to pay, not the employee. Therefore, California employers may not deduct credit card processing fees from employee tips.

David Payab, Esq. from The Law Offices of Payab & Associates can be reached @ (818) 918-5522 or by visiting


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