For today’s article, I am exploring what the “no tax on tips” provision means for restaurant employees who rely on gratuities as well as challenges restaurants are facing, and diving into a popular seasonal trend — what’s the deal with pumpkin spice? 

The U.S. Department of the Treasury and the Internal Revenue Service recently issued guidance on the “no tax on tips” provision. The proposed regulations identify occupation classifications that customarily and regularly receive tips and define “qualified tips” that eligible taxpayers may claim as a deduction. 

The deduction is up to $25,000 per year and applies only to federal income tax — not to Social Security (FICA), Medicare or state and local taxes. It is even more important that tipped employees keep proper records and report their tips to their employer. 

The proposed regulations list nearly 70 occupations that typically receive tips, ranging from bartenders to water taxi operators. Among the listed occupations are hospitality, food and beverage workers; home services; hair stylists; transportation and delivery personnel; and personal services. 

Qualified tips must be paid in cash or an equivalent form, such as a check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash, or another form of electronic or mobile payment. These tips must be received directly from customers or through a mandatory or voluntary tip-sharing arrangement, such as a tip pool. 

Tip pooling is a system in which tips earned during a shift are collected into a shared pool and then redistributed among the team. Instead of each employee keeping only what they personally earned, everyone in the pool receives a portion based on a set formula. For example, in many restaurants, the server shares tips with the host, bartender and busser. 

Some service charges do not qualify as tips. For instance, if a restaurant adds an automatic 18% service charge for large parties and distributes that amount to waiters, bussers and kitchen staff — and the customer has no option to modify or remove the charge — the distributed amounts are not considered qualified tips. 

I have written previously on proposed legislation that would eliminate the tip provision’s impact on minimum wage in Illinois. Illinois’ current law, effective Jan. 1, 2025, requires employers to pay tipped employees a base wage of $9 per hour, allowing a tip credit of up to 40% of the $15 minimum wage. Illinois law guarantees employees that their employer will make up any difference so the employee receives the full minimum wage. 

Some Illinois legislators have proposed phasing out this tip credit, requiring employers to pay the full minimum wage to tipped workers. Chicago has adopted its own approach. Under the city’s “One Fair Wage” ordinance, the tip credit is being phased out, with the goal of all tipped workers receiving Chicago’s full minimum wage by 2028. 

Meanwhile, restaurants continue to face significant financial pressures. If you go to the grocery store, you know one of the major challenges restaurateurs have been facing — increased costs. Operating expenses, including labor, property taxes, insurance and rent, have also increased, pushing menu prices ever higher. Most restaurants operate on very slim margins, and those margins are getting thinner. 

Nationwide, the “cost of eating out has gone up more than 30% since 2019, and the average check at fast food restaurants is up 41% since 2019,” according to a recent Crain’s Chicago Business article. One could say it has become too much for customers to “stomach.” Diners are cutting back on their spending by eating out less and selecting cheaper options when they do dine out. 

The question for restaurant operators is: how much can they increase the price of a burrito or hamburger before losing customers? 

As restaurants navigate this financial landscape, they’re also adapting to seasonal trends that influence consumer behavior. One such trend — pumpkin spice — has become a cultural phenomenon that extends far beyond the fall menu. 

Pumpkin spice refers to a blend of spices (no pumpkin) that was used to flavor pumpkin pie, often combining cinnamon, nutmeg, ginger, allspice and cloves. The spice blend has long been a part of the American baking tradition. In fact, there are two recipes for spice-filled “pumpkin” pie in Amelia Simmons’ 1798 reprint of her cookbook “American Cookery” — one made with nutmeg and ginger, the other with allspice and ginger. 

Centuries later, in the 1930s, spice manufacturing companies like Thompson & Taylor Spice Co. and McCormick & Co. came out with a revolutionary product — pumpkin pie spice, which is a pre-blended mix that meant bakers could buy one spice instead of several. Today, McCormick’s blend, originally launched in 1934, includes four spices: cinnamon, ginger, nutmeg and allspice, plus sulfiting agents. 

Uses for the spice blend didn’t stop at pie. While it’s unclear who first added pumpkin spice to a latte, Starbucks has made a fortune incorporating it into their drinks. It’s now available as a seasonal menu item around the world and has become Starbucks’ most popular seasonal beverage of all time. From 2003 to 2021, Starbucks sold more than 424 million pumpkin spice lattes in the U.S. alone. 

A jar of pumpkin spice always comes in handy when baking pie, cake or quick bread, added to your favorite coffee shop-inspired latte or even sprinkled in judicious amounts into savory dishes like stews. 

Here is a short recipe from the New York Times to make your own. Enjoy some pumpkin spice this fall; and remember to dine out at a local restaurant and, of course, leave a great tip (preferably cash) for your server. 

Pumpkin spice blend 

Yield: 2 tablespoons ground spice blend 

Ingredients 

• 1 tablespoon ground cinnamon
• 1 teaspoon ground ginger
• 1/2 teaspoon ground nutmeg
• 1/4 teaspoon ground allspice
• 1/4 to 3/4 teaspoon ground cloves, to taste 

Directions 

Place the cinnamon, ginger, nutmeg, allspice and cloves in a sieve set over a small bowl; sift to make sure you don’t have any clumps of spice. Mix well, and then transfer to an airtight container. Store in a dark, cool space. It will keep for as long as the spices stay fresh.

About

Lincoln Land Community College offers credit programs in Culinary Arts, Hospitality Management and Baking/Pastry, and non-credit cooking and food classes through LLCC Community Education.

Cooking or food questions? Email epicuriosity101@llcc.edu.