Many employers are hearing “No Tax on Tips” and assuming tip tracking requirements are going away.
They aren’t.
For California employers, tip-related compliance is still governed by state wage and hour laws, which continue to require accurate tracking, reporting, and documentation.
Even with this federal update, employers must still:
- Track tips received by employees
- Report tip income through payroll systems
- Apply required federal and state withholdings
- Maintain accurate wage statements reflecting tip income
At Koegle Law Group, we understand that California restaurants operate within a highly regulated environment, particularly when it comes to wage and hour compliance. The federal “No Tax on Tips” rule has added another layer of complexity to tip reporting and payroll documentation.
By maintaining clear policies, properly tracking tip income, and ensuring accurate wage statements, restaurant owners can better navigate these evolving requirements.
Learn More
We’ve created additional resources to help California employers better understand what this law does—and does not—change:
👉 Watch the video series (FAQs):
https://www.youtube.com/playlist?list=PLl3zL33QEco3fRsQP5KMhOtnJ0XrfG8Cw
👉 Read the full guide:
https://www.koeglelaw.com/2026/03/19/california-no-tax-on-tips-law-explained-what-restaurant-owners-need-to-know-in-2026/
DISCLAIMER: This client alert is provided for informational purposes only and does not constitute legal advice. The information contained herein may not reflect the most current legal developments. You should consult with qualified legal counsel before taking any action based on the information in this alert. Receipt of this alert does not create an attorney-client relationship.
This article was originally published by Koegle Law Group, proudly serving businesses in Santa Clarita and beyond. This communication may be considered advertising material under the rules of professional conduct governing lawyers in California.