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  • Question

    Is the service charge for the meals considered a gratuity or not. Now my meals cannot exceed $9.00 each because of a 21% service charge which would make the per meal rate $10.89. In other words should we be paying the service charge for not only the meals but AV equipment and General Session room rental. I cannot find anything in the FAR.


    Answer

    A "service charge" is not considered a gratuity. A mandatory service charge is an amount that a customer is required to pay based on a contractual agreement. An example of a mandatory service charge that is a contractual agreement would be a 10 or 15 percent charge added to the cost of a banquet. Such charges are considered to be amounts owed by the customer to the provider, and not "gratuities" voluntarily left for the employees of the provider. The meals and incidental expense (M&IE) rates from the Joint Travel Regulations include taxes and tips, but not service charges. So, paying a service charge above and beyond the per diem rate is not prohibited. However, the Government contracting officer is still responsible for determining that the service charge is fair and reasonable.

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