Diner gives waitress a tax-exempt 'personal gift' in lieu of tip

A man dining at the Del Rio Bordertown Cafe in Joplin, Mo., was apparently fed up with local tax laws, so he left his server a tax-exempt “gift” instead of a gratuity.

According to Reddit user ScotHibb, who posted a photo of the restaurant check earlier this week, the customer declined to leave a tip for his server on his credit card. Instead, he wrote the words “taxation is theft” on the check's tip line.


On top of his $24.47 check, however, he left a stack of bills totaling at least $7 along with a short note explaining his motive for declining to appropriately “tip.”

“This is not a tip,” wrote the unidentified restaurant patron. “This is a personal gift and not subject to federal or state income taxes.”

The Reddit post, which ScotHibb titled “The Libertarian way to tip,” has since racked up over 1,700 replies on the forum. But while many of the commenters commend the customer on his clever approach to tipping, plenty of posters weren’t so sure he wasn’t just helping the waitress commit tax fraud.

Grubstreet claims the money is “theoretically” untaxable. What’s more, a representative for the IRS who spoke with ATTN.com reportedly refused to comment on the implications, given that he’d never heard of such a situation before.

Then again, assistant teaching professor Rachel Wilson, who teaches accountancy at the University of Missouri and served as a tax consultant with PricewaterhouseCoopers, isn't so convinced that the waitress received a "gift" at all.

"Calling something a gift does not make it a gift," she tells Fox News. "You determine if something is a gift based on the donor's intent. To be a gift, it must be made out of benevolence, not associated with a business relationship or some other quid pro quo motivation.

"For example, a 'gift' from your employer generally would be considered compensation, just as a 'gift' to a waitress would be a tip, because of the business relationship."

Wilson conceded that some circumstances are "not always that simple," such as when a customer knows the waitress personally, or if he knew she was struggling financially and wanted to help with a personal problem.


Still, Wilson wasn't convinced of the diner's ultimate motivations.

"Based on the note left, it does not sound like benevolence was the motivation. Thus, I would lean towards this being a taxable tip," she said.

The IRS spokesman who spoke with ATTN added that any income in the form of a gratuity is taxable. He also provided a link to the IRS’s guidelines on reporting such income.

But as for personal gifts? The IRS says they’re only taxable if they total more than 14,000 per year.