Restaurant service fees and junk fee laws in the US: what you can still charge in 2026

A 3% "kitchen appreciation fee" here, a 5% "wellness surcharge" there, a 20% automatic gratuity for parties of six, plus a credit card fee at the end. American diners have spent the last few years discovering line items on their checks that were nowhere on the menu, and lawmakers noticed. "Junk fee" laws now exist at the federal level and in several states, and while restaurants dodged the strictest federal rule, state laws like California's SB 478 apply to them directly.

If you run a restaurant in the US, the question is no longer "can I add a service fee?" but "where, how, and with what disclosure?" This guide walks through what the FTC rule actually covers, the California regime and its restaurant carve-out, the states where credit card surcharges are restricted or banned, how the IRS treats service charges versus tips, and why simply raising menu prices often beats fee stacking anyway.

One note before we start: most fee disputes begin at the point of booking or ordering, when the guest forms an expectation of what dinner will cost. A booking flow that shows your policies clearly before the guest confirms is your first compliance tool. That is one reason we built a reservation system with a free plan and no commission on covers at ViteUneTable: your fees and policies should be visible to the guest before they ever sit down.

What lawmakers mean by "junk fees"

The target of these laws is not fees as such but drip pricing: advertising one price to get the customer in, then adding mandatory charges later in the transaction. The Federal Trade Commission calls this "bait-and-switch pricing that hides the total price by omitting mandatory fees and charges from advertised prices" in its Rule on Unfair or Deceptive Fees, published in the Federal Register in January 2025.

For a restaurant, the practices under scrutiny are:

• Mandatory service fees or surcharges (a percentage added to every check) that do not appear on the menu next to the prices
• Automatic gratuities for large parties that guests only discover on the check
• Credit card surcharges added at payment
• Vague fees with no stated purpose ("operational fee", "concept fee")

The common thread in every law below: the total, real price must be knowable before the customer commits. None of these laws caps what you may charge. They regulate how and when you say it.

The federal FTC rule: restaurants are not covered (but do not relax)

The FTC's Rule on Unfair or Deceptive Fees (16 CFR Part 464) took effect on May 12, 2025. Despite the "junk fees" headlines, its scope is narrow: it applies only to live-event tickets and short-term lodging such as hotels and vacation rentals. The FTC had initially proposed an economy-wide rule and received over 60,800 public comments on that proposal, but the final rule, as published in the Federal Register, was deliberately tailored to those two industries. Restaurant checks, service fees and menu prices are outside it.

Two reasons not to treat that as a green light:

1. Section 5 of the FTC Act still applies to everyone. Charging a mandatory fee that was never disclosed remains a deceptive practice under general federal law, restaurant or not.
2. The states moved first, and some of their laws do cover restaurants. That is where the real rules are.

California: SB 478, and the restaurant carve-out in SB 1524

California's "Honest Pricing Law", SB 478, took effect on July 1, 2024. It amended Civil Code section 1770 to make it an unlawful practice to advertise, display or offer "a price for a good or service that does not include all mandatory fees or charges", with narrow exceptions for government taxes and actual shipping costs. As written, it would have forced California restaurants to fold every mandatory service charge into their menu prices.

Weeks before it took effect, the legislature passed SB 1524, which carved restaurants back out, under conditions. A mandatory fee or charge for food or beverage sold directly to a customer by "a restaurant, bar, food concession, grocery store, or grocery delivery service" is exempt from the total-price rule provided the fee is:

• clearly and conspicuously displayed, and
• accompanied by an explanation of its purpose, on any advertisement, menu or other display that lists prices.

So a California restaurant may still charge, say, a 4% service fee, but it must appear on the menu itself, near the prices, with its purpose stated, not in fine print on the last page and not only on the check. Since July 1, 2025, the display must also meet the "clear and conspicuous" text standards the bill references, so a footnote in tiny gray type is exactly what the law was written to end. Note that the carve-out does not extend to third-party delivery platforms, which must still show fee-inclusive pricing.

If you operate in California, the practical test is simple: could a guest reading your menu (paper, board or online) calculate their full mandatory cost before ordering? If not, you are exposed to consumer lawsuits under the Consumers Legal Remedies Act, which is how this law is enforced.

Minnesota: mandatory fees must be in the price, gratuities must show their percentage

Minnesota went further than California. Since January 1, 2025, Minnesota Statutes section 325D.44, subdivision 1a makes it a deceptive trade practice to advertise, display or offer "a price for goods or services that does not include all mandatory fees or surcharges". Unlike California, Minnesota gives restaurants no general carve-out for service fees: a mandatory percentage fee must be baked into the listed prices.

The statute does address hospitality specifically: a food or beverage service establishment complies if the total price includes "a clear and conspicuous disclosure of the percentage of any automatic and mandatory gratuities charged". In other words, an automatic gratuity for large parties remains possible, but its percentage must be disclosed clearly up front, and generic mandatory "service fees" that are neither in the menu price nor a disclosed gratuity are off the table.

Credit card surcharges: a state-by-state minefield

Passing card processing costs to the guest is legal in most states, but not all, and the disclosure rules differ. Here are three states whose rules we verified directly in the statute text:

Elsewhere, rules range from percentage caps to disclosure requirements, and they change: check your own state's statute or attorney general guidance before adding a card fee, and do not rely on what your POS vendor's default settings imply.

The card networks add their own layer. Visa requires merchants to notify their acquirer 30 days before they begin surcharging and to disclose the surcharge to customers at the point of sale. A surcharge program set up without following network rules can cost you your processing agreement even in a state where surcharging is legal.

The safest pattern across all states, where you choose to price the card cost at all, is the cash discount framed honestly: post your regular (card) prices and offer a stated discount for cash. Every statute we cite above explicitly permits that structure.

Service fee or tip? The IRS has already decided

Many restaurants adopted service fees as a tipping alternative, then discovered the tax consequences. The IRS position, set out in Revenue Ruling 2012-18 and summarized on its tip recordkeeping and reporting page, is that a payment only counts as a tip if the customer pays it free from compulsion and determines the amount themselves. Calling a charge a "tip" or "gratuity" on the check changes nothing.

That means a mandatory service fee or an automatic 18% large-party gratuity is a service charge, and when you distribute it to staff it is:

• ordinary wages, subject to income tax withholding, Social Security and Medicare like any other pay
• not eligible for the FICA tip credit that genuine tips generate for the employer
• employer income for any portion you keep

Guests, meanwhile, often assume a "service fee" goes to their server the way a tip would, and several lawsuits against restaurants have turned on exactly that ambiguity. If you charge a service fee, state on the menu what it funds and whether tipping is still expected. The wage-and-hour side of this question (tip credits, tip pooling, state minimum wages) has its own rules, which we cover in our guide to tipping and the tip credit in US restaurants.

Why raising menu prices usually beats fee stacking

There is a business case, not just a legal one, against surcharges. The FTC's own rulemaking record describes the dynamic: businesses that show honest all-in prices get undercut by competitors displaying "an artificially low price" with fees revealed later, and consumers end up frustrated and unable to compare offers. That frustration lands on whoever is holding the check: your server, your host, your Google reviews.

Fee stacking also has a ceiling. A guest who accepts a $34 entree may still revolt at a $30 entree plus a 3% wellness fee plus a 4% service fee plus a card surcharge, because each line item feels like a small betrayal even when the total is identical. Menu prices are the one number diners never dispute as hidden. If your margins need the extra 4%, the durable fix is repricing the menu itself, which is a craft of its own: our guide to restaurant menu pricing covers cost-based and psychology-based approaches to doing it without scaring regulars.

The honest summary: a clearly disclosed fee is legal in most of the country, and transparent pricing is legal in all of it. When in doubt, put it in the price.

A compliance checklist for 2026

1. List every mandatory charge where prices appear. Menu, website, third-party listings, booking flow. If a fee is mandatory, it belongs next to the prices with its purpose stated (California requires exactly this; it is good practice everywhere).
2. Check your state before surcharging cards. Banned in Connecticut and Maine; total-price posting required in New York; rules vary elsewhere. Notify your processor per network rules before you start.
3. Treat service charges as wages, not tips. Withhold accordingly, and do not claim the FICA tip credit on them.
4. Say where the service fee goes. Ambiguity between "fee" and "gratuity" is the seed of most guest complaints and several lawsuits.
5. Disclose reservation-related fees at booking, not after. Cancellation fees, deposits and card holds must be agreed to before the guest confirms the table.

That last point is where your reservation system does the compliance work for you. With ViteUneTable, the free plan gives you an online booking link and widget with automatic confirmation emails, at 0% commission with no time limit, so the terms a guest accepted are in writing from the start. The Standard pack (€29 excl. VAT per month) adds email reminders and Reserve with Google, and the Standard + Anti No-Show pack (€49 excl. VAT per month) adds credit card holds, the mechanism that makes a disclosed no-show fee actually collectible.

Frequently asked questions

Are restaurant service fees legal in the United States?

Yes, in every state, provided they are disclosed before the customer orders. The strictest regimes are California (the fee must appear clearly on the menu with an explanation of its purpose, per SB 478 as amended by SB 1524) and Minnesota (mandatory fees must be included in listed prices, with automatic gratuities disclosed as a percentage).

Does the FTC junk fee rule apply to restaurants?

No. The FTC Rule on Unfair or Deceptive Fees (16 CFR Part 464), effective May 12, 2025, covers only live-event tickets and short-term lodging. Restaurants remain subject to general federal deception law (Section 5 of the FTC Act) and to state statutes.

Can I add a credit card surcharge to a restaurant check?

It depends on the state. Connecticut and Maine prohibit surcharges by statute; New York allows them only if the total card-inclusive price is posted. Where allowed, card networks like Visa require advance notice to your acquirer and clear disclosure to customers. Cash discounts from a posted regular price are permitted in all three of those states.

Is an automatic gratuity a tip?

Not for tax purposes. Under IRS Revenue Ruling 2012-18, a payment is only a tip if the customer chooses freely whether and how much to pay. A mandatory percentage is a service charge: wages subject to withholding, with no FICA tip credit for the employer.

Do junk fee laws cap how much I can charge?

No. None of the laws discussed here limits the amount of a fee or a menu price. They regulate disclosure: the guest must be able to see the full mandatory cost before committing, whether that is on the menu, on a posted card price, or in the booking flow.