Taxation thumb|220px|Hair stylists are among the service workers who are often tipped for their service in the United States. Tips are considered income. The entire tip amount is treated as earned wages with the exception of months in which tip income was under $20. Unlike wages where payroll tax (Social Security and Medicare tax) are split between employee and employer, the employee pays 100% of payroll tax on tip income and tips are excluded from worker's compensation premiums in most states. This discourages no-tip policies because employers would pay 7.65% additional payroll taxes and up to 9% worker's compensation premiums on higher wages in lieu of tips.
Taxation thumb|220px|Hair stylists are among the service workers who are often tipped for their service in the United States. Tips are considered income. The entire tip amount is treated as earned wages with the exception of months in which tip income was under $20 Unlike wages where payroll tax (Social Security and Medicare tax) are split between employee and employer, the employee pays 100% of payroll tax on tip income and tips are excluded from worker's compensation premiums in most states. This discourages no-tip policies because employers would pay 765% addit.ional payroll taxes and up to 9% worker's compensation premiums on higher wages in lieu of tips.