The Do's and Don'ts of a Minimum Wage Surcharge: What Washington Businesses Need to Know

Date: October 13, 2015

Related Content: News Labor Minimum Wage Washington

Surcharges may help Seattle and SeaTac businesses offset the cost of a $15 minimum wage—if they follow the Attorney General's new rules.

Before two Washington cities voted to adopt a $15 minimum wage, local employers were already dealing with the heftiest minimum wage burden of any state in the country. The hike prompted some businesses in Seattle and SeaTac to start adding a surcharge to customer bills in order to foot the cost.

These labor surcharges are perfectly legal, State Attorney General Bob Ferguson concluded, as long as businesses are transparent about how they’re used. Ferguson’s office recently released guidelines for those who choose to follow this route.

Here are a few do’s and don’ts for businesses that are considering a surcharge to offset minimum wage costs.

  • DO: Let customers know you’ve added a surcharge to their bills in response to minimum wage hikes.
  • DON’T: Call your surcharge a “tax.”

The reason: “There is a significant distinction between a business telling its customers that it chose to add a surcharge, and communicating to customers that the government requires a surcharge,” Assistant Attorney General Travis Alley wrote in a letter to NFIB.

  • DO: Use surcharge revenue to help pay your employees’ paychecks.
  • DON’T: Use that money to buy a new water cooler for the office.

The reason: “If a surcharge description is provided to consumers, than revenue generated from that surcharge must be used as described,” the Attorney General’s guidelines state.

  • DO: Clearly disclose the surcharge on receipts, menus and at all points of purchase.
  • DON’T: Neglect to explain where the money’s going.

The reason: Legally, businesses need to disclose the amount of every surcharge and how it will be applied. Remember that surcharges are subject to Washington’s business and occupation (B&O) and retail tax.

Related Content: News | Labor | Minimum Wage | Washington

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