# Calculation of the Amount to Be Allocated

The amount to be allocated as tips to an employee for a given pay period is the result of the following calculation:

• 8% (or the rate we determine further to a request for a reduction in the allocation rate) of the amount of the tippable sales before taxes attributable to the employee for the pay period;

minus

• the amount of tips received by the employee on tippable sales during the period (before tips are shared with other employees under a tip-sharing arrangement). Note that tips received by the employee from other employees under a tip-sharing arrangement are not taken into account in this calculation.

If the result of this calculation is negative, no amount is to be allocated as tips to the employee for the pay period in question.

Example of a situation where an amount must be allocated as tips

In this example, the employer must allocate an amount as tips for the pay period in question since, even though the amount of tips reported by the employee (\$80) is equal to 8% of the employee's tippable sales, the amount received by the employee as tips on tippable sales (\$70) is less than 8% of the employee's sales (\$1,000 × 8% = \$80).

Amount of tippable sales (column A of form TP-1019.4-V) Tips received from customers on these sales (column B of form TP-1019.4-V) \$1,000 \$70 − \$10 = \$60 + \$20 = \$80
8% of tippable sales (8% × \$1,000) Minus tips received from customers on these sales (column B of form TP-1019.4-V) \$80 \$70 = \$10 \$10
Example of a situation where no amount must be allocated as tips

In this example, the employer is not required to allocate an amount as tips for the pay period in question since, even though the amount of tips reported by the employee (\$70) is less than 8% of the employee's tippable sales, the amount received by the employee as tips on tippable sales (\$150) is more than 8% of the employee's sales (\$1,000 × 8% = \$80).

Amount of tippable sales (column A of form TP-1019.4-V) Tips received from customers on these sales (column B of form TP-1019.4-V) \$1,000 \$150 − \$90 = \$60 + \$10 = \$70
8% of tippable sales (8% × \$1,000) Minus tips received from customers on these sales (column B of form TP-1019.4-V) \$80 − \$150 = -\$70 = \$0

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