Service Charge

A service charge is a mandatory percentage fee added to a bill. The most common context is large-party restaurant dining: many restaurants add an automatic 18-20% service charge to parties of 6+ to ensure servers are tipped fairly even if guests forget.

Unlike tips, service charges are taxable and the restaurant has more flexibility in how they’re distributed (some keep them as restaurant revenue and pay servers a higher hourly rate; others pass through 100% as gratuity).

On the receipt, a service charge appears as a separate line near the bottom: "SERVICE CHARGE 18%: $X.XX" or "Auto Gratuity (Party of 8): $X.XX". Tax is sometimes calculated on the post-service-charge amount, sometimes not — varies by state.

Some hotels add a "resort fee" or "destination fee" which is functionally a service charge — a mandatory daily fee for amenities like Wi-Fi, gym access, pool use. These show up on the folio as separate line items.