Arkansas Service Charge Laws: What to Know About Extra Fees, Surcharges, and Gratuities

Ever noticed an extra “service charge” or “convenience fee” on your bill at a restaurant, hotel, or when making a purchase in Arkansas? You’re not alone! In the Natural State, service charges and other added fees spark plenty of questions for customers and business owners alike. Are they legal? Do they have to be disclosed? What’s the difference between a tip and a service charge? Let’s break down Arkansas service charge laws in plain English.

What Is a Service Charge?

A service charge is any mandatory fee added by a business to the cost of a service or product. It’s not a voluntary tip. You might see it as an “automatic gratuity” at a restaurant, a “credit card surcharge” at a small shop, a “facility fee” at a hotel, or a “processing fee” when you pay online.

Example: A restaurant automatically adds 18% to the bill for large groups as a “service charge.”
Example: An event ticket includes a “convenience fee.”
Example: A merchant charges an extra 3% for credit card purchases.

Are Service Charges Legal in Arkansas?

Yes, service charges are legal in Arkansas—but they must be disclosed to the customer before purchase. Arkansas law does not have a single, specific statute regulating every kind of service charge, but consumer protection and truth-in-advertising rules apply:

Disclosure: Businesses must make sure all mandatory fees and charges are clearly stated before the customer agrees to pay. Hidden or last-minute fees can be considered deceptive under the Arkansas Deceptive Trade Practices Act (A.C.A. § 4-88-101 et seq.).
Honest labeling: Calling a mandatory fee a “tip” or “gratuity” when it’s actually a service charge could be considered misleading or deceptive.
Credit card surcharges: Businesses can add a fee for credit card payments if they disclose it before the sale. Surcharges for debit cards are generally not allowed.

Service Charges vs. Tips: Know the Difference

Arkansas, like federal law, treats service charges and tips differently:

Service charges are required, and the money goes to the business—not directly to the employee. The business can decide if, or how, these charges are shared with staff. They can also be used to help meet minimum wage obligations.
Tips (gratuities) are voluntary payments left by customers and belong to the employees, though tip pooling is allowed.
Employers must be clear on receipts or menus about what is a tip and what is a service charge.

Common Service Charges in Arkansas

Restaurant service charges: Added for large parties or catered events. Some restaurants have started including a small “living wage fee” or “hospitality fee” for all guests—always read the menu and ask if unsure.
Credit card surcharges: Legal for credit cards if disclosed up front, but not allowed for debit cards.
Convenience, facility, or delivery fees: Common in ticketing, food delivery, and hotels.

Can Customers Refuse to Pay a Service Charge?

If the charge was clearly disclosed—on the menu, sign, or before payment—you’re expected to pay it. If it’s a surprise or wasn’t disclosed, you may have grounds to dispute the fee or complain to the Arkansas Attorney General’s Consumer Protection Division.

Sales Tax on Service Charges

Most mandatory service charges are subject to state and local sales tax in Arkansas, just like the rest of your purchase. Voluntary tips are not taxed as part of the sale.

Employer Rules: Service Charges and Employee Pay

If a business collects a mandatory service charge, the money goes to the business, not automatically to employees. Employers may use it to help pay wages, but must follow minimum wage and overtime laws. Employees should check their pay stubs and ask questions if unclear about service charge distribution.

How to Spot and Avoid Surprise Fees

Check menus, websites, or contracts for mentions of service charges or extra fees before you buy.
Ask up front: “Are there any mandatory service charges or extra fees?”
If surprised by a charge, ask for clarification or contact the Arkansas AG’s office if you think it’s unfair or deceptive.

Helpful Resources

Final Thoughts: Service Charges in Arkansas—Legal, But Must Be Upfront

Arkansas businesses are allowed to add service charges, but they must be honest, clear, and up front about it. For consumers, the best defense is to read carefully, ask questions, and speak up if you think a fee wasn’t properly disclosed. For business owners, transparency protects you from unhappy customers—and from legal trouble.