Arizona Service Charge Laws: The Real Deal on Fees, Surcharges, and Gratuities

If you’ve ever paid a “service charge” at a Phoenix restaurant, seen a “convenience fee” on your online bill, or wondered about that extra line at the bottom of your hotel receipt, you’re not alone. Arizona businesses add all sorts of fees—but what does the law actually say? Here’s your plain-English guide to service charge laws in Arizona, whether you’re a business owner, employee, or consumer.

What Is a Service Charge?

A service charge is any extra, mandatory fee added to a bill for a product or service. It might show up as an “automatic gratuity” at a restaurant, a “credit card surcharge” at a local shop, or a “processing fee” on a ticketing website. It’s not the same as a tip—though many people get them mixed up.

Example: Restaurant adds 18% service charge for parties of 6 or more.
Example: Concert tickets include a “processing fee.”
Example: Salon adds a “credit card fee” for non-cash payments.

Are Service Charges Legal in Arizona?

Yes, service charges are legal in Arizona, but there are important rules:

Truth-in-advertising laws: Arizona law (and the federal FTC Act) requires all fees to be disclosed clearly and honestly up front—no sneaky or last-minute surprises.
No deceptive labeling: Businesses cannot mislead customers about the nature of a charge. For example, calling a mandatory fee a “tip” when it’s really a service charge could violate Arizona’s Consumer Fraud Act (A.R.S. § 44-1522).
Credit card surcharges: Arizona allows businesses to add surcharges for credit card payments, as long as they disclose this before the sale. Debit card surcharges are generally not allowed.

Service Charges vs. Tips: Key Differences

Arizona (like federal law) treats service charges and tips differently, especially for employees:

Service charges are required, and the money goes to the business. The business decides whether, and how, to share it with staff. These can be counted toward minimum wage requirements.
Tips (gratuities) are voluntary payments left by customers and belong to the employees who provided the service (subject to tip pooling rules).
Employers must clearly describe which is which on receipts, menus, or contracts.

Common Service Charges in Arizona

Restaurant service charges: Often applied to large parties or catered events. Some restaurants add a flat fee to every bill—always check your menu or ask first.
Credit card surcharges: Legal if disclosed up front, and only for credit (not debit) transactions.
Delivery, resort, and “convenience” fees: Common on food delivery apps, hotel stays, and online ticket purchases.

Can a Customer Refuse to Pay a Service Charge?

If the charge was disclosed up front—on the menu, website, or invoice—you generally must pay it. If it was hidden or not disclosed until after the fact, you may have grounds to dispute it or complain to the Arizona Attorney General’s Consumer Protection Office.

Sales Tax on Service Charges

In Arizona, most mandatory service charges are subject to sales tax—just like the rest of your purchase. Voluntary tips are not taxed.

Employer Rules: Service Charges and Employee Pay

If a business collects a mandatory service charge, that money belongs to the business, not the employee. It can be used to help pay wages (including meeting Arizona’s minimum wage, which is higher than the federal rate). Employers must be transparent about how these charges are handled—staff should always check pay stubs and ask questions if it’s unclear.

How to Spot (and Avoid) Surprise Fees

Read the fine print—look for extra fees or service charges on menus, order forms, or online checkouts.
Ask before you pay: “Are there any service charges or fees I should know about?”
If you’re hit with a surprise fee, ask for clarification and don’t be afraid to dispute it if it wasn’t disclosed.

Helpful Resources

Final Thoughts: Service Charges in Arizona—Legal, But Must Be Honest

Arizona law lets businesses add service charges, but only if they’re clearly disclosed and not misleading. If you’re a consumer, always check for extra fees before you pay. If you’re a business, label charges honestly and communicate with both staff and customers to avoid complaints or legal trouble.