[z3n]

So why does the business pay the tax?

~~~

Because it was a credit card transaction, so the funds hit their bank account, and it’s taxable revenue.

What i don’t understand is why the restaurant had to pay her the full amount. The restaurant received the funds into their merchant account. They could have withheld tax.

[HartleyMBaldwin]

Because it was a credit card transaction

Well, that convinces me. Next time I tip $10,000 I'll use cash.

[Mr. Lucky]

Ummm, if the restaraunt had to book the tip as gross revenue, the payout to the employees would have been deductible.

Something doesn't make sense here.