Wednesday, February 05, 2003
Copyright © Las Vegas Review-Journal

TAXATION: Union hails tip deals

IRS to keep voluntary tip withholding steady for 14,000 LV workers

Eva Strohbach, a cocktail server at the Triple 7 Restaurant and Brewery in Main Street Station carries drinks to customers Tuesday. Photo by John Gurzinski. New deals between casino operators and the Internal Revenue Service will maintain current voluntary tip withholding rates for the waitresses, bartenders, cocktail servers and bellmen. Photo by John Gurzinski.

An estimated 14,000 workers in Las Vegas are getting a break from the Internal Revenue Service, industry executives said Tuesday.

A series of new deals between several Strip casino operators and the Internal Revenue Service will maintain current voluntary tip withholding rates for the waitresses, bartenders, cocktail servers and bellmen.

The three-year deals cover workers at Mandalay Resort Group, Park Place Entertainment and Boyd Gaming, along with employees at Harrah's Las Vegas, and Culinary Union Local 226 leader D. Taylor said the agreements are good for tipped workers.

"These deals are a good reprieve for tipped workers," said Taylor, Culinary secretary-treasurer, of the deals reached late last month. "The net effect on all of the workers is that the rates are flat, a big improvement over the massive tax increase the IRS originally proposed."

The deals benefit workers in a couple of ways, said Boyd Gaming's Rick Darnold, vice president, tax and financial administration.

"The fact that there's certainty that the rates can't be adjusted up is a plus for our employees," Darnold said. "(When the IRS began the program) initial withholding rates were fair, but the IRS has gradually raised them."

The IRS two years ago proposed deals that would have doubled or tripled withholding rates for some workers, proposals industry insiders said would have prompted tens of thousands of workers to leave the voluntary programs that now cover about 200,000 workers at 185 Nevada casinos.

"The service muscled up early on, but gradually something happened, and toward the end of last year it became clear they wanted a deal," said an insider to the extended negotiations.

The IRS in October agreed to extend Nevada's participation in the program until June 30. As long as the program is extended, the new deals negotiated by Park Place, Mandalay Resort, Boyd and Harrah's would protect their tipped workers from subsequent withholding rate increases.

Many other Nevada casino companies already reached new deals with the IRS, but Taylor said the withholding rates included in the new deals are lower, and better for employees.

The Tip Rate Determination Program is offered only in Nevada, under a deal the IRS negotiated with state casinos in 1991. Under the agreement, Nevada employers agreed to set up a system to account for tip income received by their workers. In exchange, the IRS agreed not to audit tip income of participating workers.

Workers who volunteer for the program agree to be taxed based upon a predetermined hourly rate of tip income instead of their actual tip income. Many of the hourly rates are less than the tipped income workers actually receive, an incentive for their participation, industry insiders said.

The IRS benefits by collecting significantly more tax dollars than were collected when tipped workers were responsible for reporting all of their tips.

In 1990, the year before the agreement, gaming workers in Nevada paid $220 million in tip taxes, but the amount increased by $100 million the year after the agreement became effective and reached $750 million by 1999.

The agreement also reduces the IRS audit workload.

Only workers who receive nonpooled tips are eligible to participate in the program. Among those eligible to participate in the program are cocktail servers, bartenders, valets, busboys, bellboys, waiters and limousine drivers. Casino table game workers are not eligible, but some keno runners are.

Taylor said company bosses worked closely with Culinary officials to negotiate fair deals with the IRS.

"For the first time, these companies worked closely with the union and the rank and file shop stewards," Taylor said. "This was a more rational process, and I take my hat off to those companies for including the workers."

The withholding amounts set by the new deals vary according to the job, hotel and shift of tipped workers.