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Anders v. State Bd. of Equalization, 82 Cal.App.2d 88, 185 P.2d 883

Facts

C. Anders and A. V. Spencer operated a drive-in restaurant in Los Angeles and employed waitresses who received tips from patrons. The waitresses retained all tips, but an agreement existed where tips equal to the minimum wage were credited against their wages. The State Board of Equalization assessed retail sales taxes on these tips, leading the plaintiffs to file a suit to recover the taxes paid under protest. The trial court ruled that the tips were part of the gross receipts from sales, thus subject to taxation.

The stipulation indicates that the respective parties to the contract of employment agreed and assumed that minimum wages had been paid from the tips received, for it states that the tips 'had been credited by said employees against the minimum wage guaranteed by the plaintiffs.'

Issue

Whether tips received by waitresses, to the extent of their minimum wages, become part of the gross receipts of the employer for sales of tangible personal property.

The question to be determined is whether tips received by waitresses in a restaurant on account of their services, to the extent of their minimum wages fixed by law, become part of the gross receipts of the employer for sales of tangible personal property.

Rule

Tips received by employees can be considered part of the employer's gross receipts if there is an agreement that they will be credited against minimum wages owed to the employees.

The minimum wages of employees fixed by law are deemed to be a part of the contract of employment.

Analysis

The court analyzed the stipulation of facts and determined that the agreement between the plaintiffs and their waitresses indicated that tips, to the extent of the minimum wages, were effectively the property of the plaintiffs. The court noted that the tips were credited against the minimum wages, which established that they were part of the gross receipts from the sales of food and drinks. Therefore, the Board of Equalization's assessment of sales tax on these tips was justified.

In effect, such tips, to that extent, become the property of the employer. They were received by the waitresses as plaintiffs' employees and agents. They were applied and credited as wages pursuant to contract.

Conclusion

The court affirmed the judgment against the plaintiffs, concluding that the tips received by the waitresses, to the extent of the minimum wages, were part of the plaintiffs' gross receipts and thus properly taxable.

The court said in the case last cited: 'In the absence of an agreement or statute to the contrary, tips are voluntary contributions or gifts from the donor to the employee and belong to the latter, but that the employer and employee may, by contract or mutual understanding, pass title to the tips, or a specified portion thereof, to the employer.'

Who won?

State Board of Equalization prevailed because the court found that the tips were part of the gross receipts from sales, as they were credited against minimum wages owed to the waitresses.

The Board of Equalization properly levied and collected sales taxes on said tips as a part of the gross receipts from the sales of tangible personal property.

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