Whether you’re at a downtown Anchorage restaurant, booking a tour in Fairbanks, or paying a bill online, you’ve probably seen service charges tacked onto your total. In Alaska, these extra charges raise plenty of questions for both businesses and consumers. What’s legal? What’s required to be disclosed? And what’s the difference between a service charge and a tip? Here’s your clear, straightforward guide to Alaska’s service charge laws, with tips for both businesses and customers.
What Exactly Is a Service Charge?
A service charge is any mandatory fee a business adds to the cost of a service or product. You might see it as an automatic gratuity at a restaurant, a “convenience fee” on an online order, or a “resort fee” at a hotel. Unlike a tip, a service charge isn’t voluntary—it’s part of the price you’re expected to pay.
- Example: A restaurant adds 18% to your bill for large parties as a service charge.
- Example: An airline tacks on a “booking fee” to your ticket.
- Example: A hotel includes a nightly “resort fee.”
Are Service Charges Legal in Alaska?
Yes, businesses in Alaska can add service charges—but they must do so honestly and transparently. There’s no single Alaska statute that bans or explicitly regulates all types of service charges, but general consumer protection and truth-in-advertising rules apply. The key requirements are:
- Disclosure: Service charges must be clearly disclosed before the customer completes the transaction. Surprising customers with hidden fees is illegal under Alaska’s Unfair Trade Practices Act (Alaska Statutes § 45.50.471 et seq.).
- No deceptive practices: The fee can’t be misleading—labeling something as a tip when it’s actually a business revenue service charge can get a business in trouble.
- Special note on payment methods: Businesses can charge extra for credit card payments (a “credit card surcharge”), as long as it’s disclosed up front and not added to debit card transactions.
Service Charges vs. Tips: What’s the Difference?
Alaska (like federal law) treats service charges and tips differently, especially when it comes to employee pay:
- Service charges are mandatory fees added by the business—these belong to the business, not directly to the employee. The business can choose to share (or not share) this money with staff, and it can be used to meet minimum wage requirements.
- Tips (gratuities) are voluntary payments left by the customer—these legally belong to the employee, though employers can require tip pooling within the staff.
- Employers must clearly explain on receipts or menus which is which. Mislabeling a service charge as a “tip” can be considered deceptive.
Common Types of Service Charges in Alaska
- Restaurant service charges: Often added for large parties or special events. Some restaurants charge a set “living wage fee” or “wellness fee” for all guests—always check your menu or receipt.
- Hotel resort/facility fees: Hotels may charge extra for amenities like gyms, Wi-Fi, or parking. These must be disclosed during booking, not just at checkout.
- Credit card surcharges: It’s legal to add a surcharge for credit card payments, but only if it’s disclosed up front (and not for debit cards).
- Delivery and convenience fees: These show up with food delivery, online event tickets, or utility bill payments.
Can You Refuse to Pay a Service Charge?
If a service charge was disclosed up front—on the menu, website, or before you paid—you generally have to pay it. If it’s a surprise or not properly disclosed, you may have grounds to dispute it or file a complaint with the Alaska Department of Law Consumer Protection Unit.
Are Service Charges Taxed?
Most mandatory service charges are subject to local sales taxes in Alaska communities that have a sales tax (since there’s no statewide sales tax). Voluntary tips are not taxed as part of the sale.
Employer Requirements: Service Charges and Employee Pay
In Alaska, if a business collects a mandatory service charge, that money goes to the business, not automatically to employees. The employer can use it to pay wages (including minimum wage) and decide how, or if, it’s distributed to staff. Employees should always ask for clear pay stub information and clarification if they’re unsure about where service charges go.
Tips for Consumers: Spotting and Avoiding Hidden Fees
- Read menus, booking sites, or order screens carefully for service charge notices.
- Ask before ordering or booking: “Are there any mandatory service charges or extra fees?”
- If surprised by a fee, politely ask for an explanation or file a consumer complaint if you believe the charge was hidden or deceptive.
Helpful Resources
- Alaska Department of Law: Consumer Protection
- Alaska Department of Labor and Workforce Development
- Alaska Tax Division (for communities with sales tax)
Final Thoughts: Alaska Service Charges—Legal, but Must Be Honest
Alaska law lets businesses add service charges, but only if they’re disclosed and not misleading. For businesses, clear labeling and communication prevent disputes. For consumers, reading carefully and asking questions are your best defenses. And if you ever think a charge is unfair or hidden, don’t hesitate to reach out to the state’s consumer protection office.
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