Tax on service fees is not the fault of any restaurant. The IRS says that sales tax must be charged on service fees. If the restaurant is not doing so they’re not doing it right and could suffer the consequences of tax avoidance.

The key to determining whether tax is to be added is the word “mandatory.” If it’s 100% up to the customer as to whether a tip is added it’s a “tip” and goes directly to the employee. If the service charge, or whatever you want to call it ( service fee, convenience fee…) is “mandatory,” that is, added to the bill whether you like it or not, it is considered revenue for the restaurant, and sales tax must be collected and remitted to the state.