Ask George: Can restaurant gift cards be used toward tax and tip?

The short answer: It depends on the restaurant. In general, chains (large and small) tend to allow it, while local restaurants sometimes do not.

The long answer: It’s a complex issue, hence the lack of a definitive policy.

First, unless specified otherwise, restaurants treat unbranded cards (from VISA, American Express, etc.) like a debit card, so the diner theoretically should be able to use it toward tax and tip.

Restaurant cards, however, are subject to house policy. Some restaurants treat them like unbranded cards; others specify “for food and beverage only”; still others prohibit the application of certain items (i.e., tax, tip, alcohol). Most do not allow for cash to be given back to the diner (hence the use of the phrase “no cash value”), as the card was intended to provide a restaurant experience, not a cash gift.

If a restaurant sells a $100 certificate at face value, for example, it hopes to recoup the entire $100 in food, beverage, and tax (for which the cost is roughly $50). Should a customer theoretically spend $20 and choose to leave an $80 tip, the restaurant loses money, which is why it prefers to issue another gift card for the balance.

In the case of a discounted or fully comped gift card (restaurants issue these all the time to charities as promotions), the situation is exacerbated, and the restaurant incurs even more costs.

A common example is when a diner uses $70 of a $100 gift card and wants to use the remaining $30 as a tip but instead is asked to tip in cash—an inconvenience, to say the least, especially since few people carry cash anymore. To keep the peace (and the patron’s future business), the restaurant will often bend the rules and honor the diner’s request.

In the scenario above, if the diner has no cash (which is often the case), a server may charge a one-cent “misc.” charge to a credit card, simply to allow the diner to leave a tip.

Speaking of gift cards, if a restaurant closes before the diner has a chance to redeem it, all is not lost. Check out some of the options in this edition of “Ask George.”

Follow dining editor George Mahe on Twitter and Instagram, or send him an “Ask George” email at [email protected]. For more from St. Louis Magazine, subscribe or follow us on Facebook,  Twitter, and Instagram.