Alabama Service Charge Laws: What You Need to Know About Fees, Gratuities

Whether you’re out to eat at a restaurant, booking a hotel, or paying a bill online, you’ve probably seen a “service charge” added to your total. In Alabama, service charges are a common source of confusion—and sometimes frustration—for both customers and business owners. So what does the law actually say about service charges in Alabama? Here’s your practical, plain-English guide to Alabama’s service charge laws, including what’s legal, what’s not, and what you should watch out for.

What Is a Service Charge?

A service charge is any extra fee added by a business to the customer’s bill for providing a service, beyond the listed price. It can show up in restaurants, hotels, event venues, delivery services, utility bills, and even online transactions. It’s not the same as a tip (gratuity), though sometimes it gets confused with one.

Example: A restaurant automatically adds 18% to a large group’s bill as a “service charge.”
Example: A hotel charges a nightly “resort fee” or “facility fee.”
Example: An online ticket seller tacks on a “convenience fee” at checkout.

Are Service Charges Legal in Alabama?

Yes, businesses can charge service charges in Alabama—as long as they are disclosed up front and not misleading. Alabama law does not have a single, detailed statute covering every type of service charge, but these key legal principles apply:

Truth-in-advertising laws: Alabama businesses must disclose all mandatory fees and charges to customers before purchase. Hiding fees until the last minute could be considered deceptive and get a business in trouble under state or federal consumer protection laws.
“No surprise fees” rule: The final price—including service charges—should be clear to the customer before they agree to pay.
Special rules for credit/debit card surcharges: In the past, Alabama restricted surcharges for using credit cards, but that law was repealed in 2015. Now, businesses can add a “credit card surcharge” as long as it’s disclosed up front and not applied to debit card transactions.

Service Charges vs. Tips: Know the Difference

Alabama law treats service charges and gratuities (tips) differently, especially when it comes to employee pay:

Service charges (like mandatory 18% on a large party) are considered business revenue, not tips. Employers decide how (or if) this money is shared with staff. It can be used to meet minimum wage obligations.
Gratuities/tips are voluntary payments left by customers for service. These legally belong to employees, though some tip pooling is allowed.
Businesses must be clear on receipts or menus about which is which. Labeling a fee as a “tip” when it’s actually a service charge could be considered deceptive.

Common Types of Service Charges in Alabama

Restaurant service charges: Often added automatically for large groups or catered events. Some restaurants now add a flat fee for all tables to help cover wage or health care costs—always check the menu or ask your server.
Hotel resort or facility fees: Many Alabama hotels add daily fees for pools, gyms, Wi-Fi, or parking. These must be disclosed during booking—not just at check-in or checkout.
Delivery and online “convenience fees”: Common with food delivery apps, event tickets, and utility bills paid online.
Credit card surcharges: Businesses can charge extra for credit card payments, but not for debit cards, and only if clearly disclosed before the transaction is completed.

Can You Refuse to Pay a Service Charge?

If a service charge was clearly disclosed on the menu, website, or before purchase, you generally must pay it—it’s part of the price. If it was a surprise or not properly disclosed, you may have grounds to dispute the fee or file a complaint with the Alabama Attorney General’s Consumer Protection Division.

Taxes on Service Charges

In Alabama, most mandatory service charges are subject to state and local sales tax—just like the rest of your purchase. Voluntary tips left by customers are not taxed as part of the sales price.

Employer Rules: Service Charges and Employee Pay

If a business adds a mandatory service charge, the money goes to the business—not directly to servers or staff. The employer may use this to help pay staff wages, but must still follow minimum wage and overtime laws. Employees should always check their pay stubs and ask questions if it’s unclear how service charges are handled.

How to Spot (and Avoid) Hidden Fees

Read the fine print on menus, bills, or booking sites—look for asterisks, footnotes, or extra fee disclosures.
Ask before ordering or booking: “Are there any service charges or extra fees I should know about?”
If you’re surprised by a fee, don’t be afraid to ask for an explanation or dispute it.

Helpful Resources

Final Thoughts: Alabama Service Charges—Legal, But Always Disclose

Alabama lets businesses add service charges, as long as they’re honest and upfront about it. As a consumer, the best defense is to read carefully, ask questions, and speak up if a fee seems sneaky. And if you’re a business owner, clear disclosure and accurate labeling are your best protection from unhappy customers and legal trouble.