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Back|USA: Laws, lawsuits, tax benefits – this is how America argues about tipping
USA: Laws, lawsuits, tax benefits – this is how America argues about tipping
Developing
Handelsblatt·1 hour ago·Business·8 min read·🇩🇪Germany·

USA: Laws, lawsuits, tax benefits – this is how America argues about tipping

Robot baristas ask for tips, New York forces delivery apps to ask. Voluntary thanks are becoming a question of power in the USA and are affecting the courts - with a signal effect for Germany.

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In the USA and New York, tipping is increasingly becoming a political issue and a dispute at checkouts, delivery apps and courts, while digital payment is also changing the tipping culture in Germany.

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Why It Matters

In New York and the United States, tips are an essential part of pay in the service sector, which is increasingly regulated by screens and laws.

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Robot baristas ask for tips, New York forces delivery apps to ask. Voluntary thanks are becoming a question of power in the USA and are affecting the courts - with a signal effect for Germany.

New York. In the Monkey Cup, the analogue is part of the concept: the small café north of Central Park in New York does not offer its guests a WiFi network. Instead, books stand on the branches of a shelf that grows like a tree over the wall. “Read a book, get to know someone,” advises a sign behind the counter.

The latte is also handmade. The baristas use cocoa powder to draw the head of a monkey on the foam - based on the name of the café. Anyone who stops here gets a break from the screen with coffee.

But the break ends at the checkout. There a tablet turns towards the guest. Three large fields light up in the middle: one dollar, three dollars, five dollars. Measured against the Spanish Latte, the house classic for $6.75, the suggestions range from just under 15 to 74 percent. “No tip”, i.e. the option not to give a tip, is also there. Smaller. Here, the guest decides whether to thank someone not with small change, but with his index finger – right in front of the staff.

Tipping has long been a given in America. Now it is a political issue. New York is now forcing delivery apps by law to ask their customers for tips when paying. The service companies Uber and Doordash are suing. President Donald Trump has given tax breaks to tips. And customers are increasingly struggling with screens that are asking for more and more in more and more places.

“Consumers are feeling the social pressure of these demands and feel they have gotten out of hand,” says Michael Lynn, a consumer researcher at Cornell University who has published numerous studies on tipping. The many requests “haven’t had enough effect to change the tipping norms,” says Lynn.

The guests rehearse the rebellion, quietly and with their index fingers. Because behind every button there is a question of power: Who pays the wages: the employer or the guest? The answer to this varies depending on the location. The dispute is being fought at the checkout, in restaurants, in politics - and in Germany, where card terminals are now asking the same question.

1. At the checkout

A short time ago, a barista worked tirelessly in the Chelsea Market, a market hall in the trendy New York district of the same name. His name was Jarvis, a silver-colored robot arm from the start-up Artly. With jerky movements he pulled espresso from a machine and frothed milk in a silver jug. Customers ordered on a screen, and Jarvis charged just under five dollars for a cappuccino - and a tip for his services.

Consumer researcher Lynn is annoyed by such queries. He said a few years ago that he almost never tips when ordering take-away or at the counter. He is not alone in this. When it comes to takeaway food, only around 25 percent of consumers say that they usually give something, Lynn tells Handelsblatt. Tipping is only customary “when so many people tip that those who don’t are seen as deviants.”

Because most Americans pay by card and hardly have any bills in their pockets, many counters now use a terminal instead of a glass to ask for a tip. But the screen is likely to exert more pressure than the glass, writes Lynn in his book “The Psychology of Tipping”.

In the glass, everyone can see how little others throw in, but the screen hides it. Customers therefore assume that most of them give something. Some restaurants now even start their suggestions at 20 percent, says Lynn - a rate that has been considered the upper limit of the usual for decades. Yesterday's generosity is today's smallest button.

So does the screen make more tips? Data from the US Census Bureau shows that more employees are receiving tips than before the pandemic, but customers are not becoming more generous: for given amounts, more than one in four people say they give less or nothing at all. Only one in ten gave more, as a survey by the financial portal Bankrate shows. So tipping is becoming more common, not higher.

Jarvis has now ceased its services at Chelsea Market. In other places, the robot arms have also stopped asking for tips. Artly cites customer feedback as the reason. At the same time, “branch employees were given a wage increase of $1.50 per hour to compensate for lower tip income,” the company explains on LinkedIn. Despite all the automation: “Real people work in every branch.” They clean, restock inventory or help with refunds. There are now physical tip jars for them again.

2. In the catering industry

On Allen Street in the Lower East Side, paying feels like it's out of date. Since 2015, Dirt Candy has been serving its upscale vegetable cuisine at rustic wooden tables. However, guests look in vain for one thing on their bills: an invitation to tip. Whatever is on the card is paid for. Not more.

“We pay our employees a living wage, starting at $29 an hour,” the restaurant explains the move. They are also offered paid vacation and sick days in excess of the legal minimum, as well as health insurance. "We see no need to lie to our guests. Their food costs exactly what is on the menu."

In most restaurants in the city it's the other way around. The minimum wage in New York City is $17. Anyone who serves guests only has to receive $11.35 from the landlord. The employer can offset the rest with the tip. In New York restaurants, guests pay up to a third of the minimum wage. Only when the tip is not enough does the host have to fill the gap.

A bill in the city council wants to change that. He plans to phase out the billing over the years. The innkeepers object. “Eliminating tip credit is a disaster,” said Andrew Rigie, executive director of the NYC Hospitality Alliance. It would cause “chaos for workers and small businesses.” In any case, it is not the city council that is responsible, but the state parliament in Albany.

Rigie points to places that have tried it. In Maine, voters abolished offsetting in a referendum in 2016, and a year later the legislature and governor reintroduced it. In Washington D.C. In 2022, almost three quarters of voters voted for abolition, and last year the city council largely recouped it. Mayor Muriel Bowser pushed for it. Since the reform came into effect, restaurants and bars have shed more than 1,700 jobs, her office argued.

Even restaurateurs who voluntarily gave up tips often gave up again. Danny Meyer, one of New York's best-known restaurateurs, began eliminating it in his restaurants in 2015. He wanted to close the wage gap between service and kitchen, because in New York tips are not allowed to be shared with the cooks.

But it was “never easy to make the calculation work for everyone involved, even in economically more robust times,” Meyer wrote in an open letter in 2020. After four months of Corona closures, he reintroduced tipping. As he said goodbye, he asked his guests: “Tip as generously as you can.”

Rigie knows another reason: When restaurants raise their prices in order to pay higher wages, "diners often shy away from the higher prices, even if they know they don't have to tip." Anyone who comes to Dirt Candy is already expecting higher prices. The tip-free restaurant recently received a Michelin star.

3. In politics

In April, Trump received an unusual visitor. Sharon Simmons, a grandmother from Arkansas, brought bags from McDonald's directly to the White House, ordered through the delivery service Doordash. The president accepted the fast food, then pulled a $100 bill out of his pocket. Tip from the President, in cash.

Simmons came so Trump could promote his tax bill. Congress has decided that up to $25,000 in tips per year will be exempt from federal income tax since 2025 and initially until 2028. But the topic is better for the show than for the statistics.

The Budget Lab estimates that only around four percent of tax returns even show tips. Middle income earners benefited the most, says John Ricco, who co-directs policy research there. Low earners hardly pay any federal tax anyway, and high earners are excluded.

To ensure that employers do not simply relabel wages as tax-free tips, the IRS only favors tips that the customer can set to zero. “The limiting factor is the customers,” says Ricco. The tax exemption does make jobs with tips more attractive, and more employees would want to switch to such professions. But the guests continue to give tips.

“Doordash is doing a good job,” praised Trump at the appointment. In New York you see things differently. Since the end of 2023, delivery apps have had to pay their drivers a minimum wage, now $22.13 per hour before tips. As soon as the rule came into force, the question about tipping on Doordash and Uber Eats was pushed back: it was only asked once the order had already been sent.

Whoever gave something else had to really want it. The drivers noticed this immediately. At the beginning of 2026, they received an average of 76 cents per delivery from the two apps; from competitors who ask when paying, it was $2.17. The city's consumer protection authority calculates that drivers lost out on more than $550 million.

The business models of some delivery apps have always been designed to ensure that drivers view tips as part of their payment - rather than as a courtesy from the customer, says James Parrott, an economist at the New School in New York. According to Parrott, the bottom line is that drivers still earn more than before the regulation because the higher wages more than compensate for the lack of tips.

Since January, the city has even stipulated the recommended tip size: at least ten percent. According to the authorities, in the first six months afterwards, tips almost doubled, and an additional $104 million went to drivers. “For years, delivery apps have buried the tip button to supplement their own profits,” says Mayor Zohran Mamdani.

Doordash counters this. “It should be up to consumers, not the City Council, whether they want to tip in New York,” the company said in December when it filed a lawsuit with Uber. As early as 2024, Doordash warned that the rules would make tipping “more of a tax.” The two companies failed in urgent court proceedings in January.

4. In Germany

Anyone who paid with a card in some German Starbucks branches until spring was offered several tip rates at the checkout. The only thing that was difficult to find was no: According to the Brandenburg consumer advice center, there was no clearly labeled button for it. The consumer advocates warned the operator AmRest. Starbucks Germany told RBB that only a limited number of branches were affected. The devices were adjusted in a timely manner and there is now a clear presentation of all options, “including the ‘no tip’ option.”

The fact that it hit an American coffee chain of all places fits into the picture. With card payments, a piece of American tipping culture has come to Germany. The farewell to the coin paved the way for this. In 2025, Germans will pay for their purchases with cards or smartphones more often than in cash for the first time, the Bundesbank found.

And the terminal providers also provide the tip button. “In this way, you can increase your sales and help your service employees get more tips,” says the payment service Sumup in a guide.

“Preset options turn an open decision into a selection with guardrails,” says Alina Stephanie Bone-Winkel from the digital association Bitkom. But the Germans defend themselves in their own way: they pay the bill with a card and thank you in coins. 58 percent of card payers prefer to leave their tips in cash, according to a survey commissioned by Girocard. Tips, of all things, become a place of refuge for cash.

Consumer advocates are relying on Brussels. The Federal Association of Consumer Organizations wants to ban manipulative design tricks in the EU, especially when it comes to card payments. The Digital Fairness Act, which the EU Commission has announced for the end of 2026, would provide an opportunity. The law is intended to protect consumers from subscription traps, addictive designs and user interfaces that lead to unwanted decisions. However, the initiative has not yet mentioned card terminals.

In the Monkey Cup, the tablet continues to turn towards the guest. How long customers there and elsewhere tip on the large fields is decided neither by cash register manufacturers nor by legislators, but entirely by the customer themselves. Or as consumer researcher Lynn says: “There is no god of tips who has the power to tell us what we have to give.”

What to Watch

AI outlook — possibilities, not facts

  • EU Commission announces Digital Fairness Act for the end of 2026

    Likely · Within months

Open Questions

  • ?How will EU legislation affect card terminals?
  • ?Will more US cities ban tip accounting?

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This article was originally published by Handelsblatt.

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In the USA and New York, tipping is increasingly becoming a political issue and a dispute at checkouts, delivery apps and courts, while digital payment is also changing the tipping culture in Germany.

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