Delaware Service Charge Laws: What Customers and Businesses Need to Know

In Delaware, it’s common to see a “service charge,” “convenience fee,” or “automatic gratuity” tacked onto your bill at restaurants, hotels, online stores, and event venues. But what’s actually legal? Who gets the money? How do service charges differ from tips or regular prices? Here’s a straightforward guide to Delaware’s service charge laws, designed for both consumers and business owners.

What Is a Service Charge?

A service charge is a mandatory fee added to the bill by a business—over and above the advertised price. It’s not a voluntary tip. In Delaware, you’ll see service charges under many names: “automatic gratuity,” “processing fee,” “resort fee,” or even “living wage fee.”

Example: A restaurant automatically adds 18% for large parties as a service charge.
Example: A hotel adds a “facility fee” or “resort fee” to each night’s stay.
Example: An online ticket includes a “convenience fee.”

Are Service Charges Legal in Delaware?

Yes, Delaware law allows service charges, as long as they’re clearly disclosed before the customer agrees to pay. There isn’t a single, all-encompassing law about service charges, but Delaware’s Consumer Fraud Act (6 Del. C. § 2511 et seq.) requires:

Truthful disclosure: All fees, including service charges, must be disclosed clearly and honestly to customers before the sale is final. Hiding charges or “surprise fees” can be considered deceptive and illegal.
No misleading labels: It’s illegal to call a required service charge a “tip” or “gratuity” if it’s not voluntary. The nature of the charge must be clear to customers.
Credit card surcharges: Delaware allows businesses to add a surcharge for credit card payments as long as it’s disclosed up front and does not exceed the actual cost of accepting the credit card. Debit card surcharges are generally not allowed.

Service Charges vs. Tips: Important Differences

In Delaware, service charges and tips are treated very differently, especially when it comes to employees:

Service charges are mandatory and legally belong to the business. The employer can decide whether, or how, to distribute the money to staff. Service charges may be counted toward meeting minimum wage requirements.
Tips (gratuities) are voluntary payments left by customers for service, and by law, belong to the employees (subject to tip pooling rules).
Employers must clearly label service charges and tips on receipts, menus, or booking sites. Mixing them up can lead to consumer complaints or lawsuits.

Common Service Charges in Delaware

Restaurant service charges: Often added to large parties, banquets, or for special services. Some restaurants add a “living wage fee” to every bill—always check the menu or ask if you’re not sure.
Hotel resort/facility fees: Charged nightly for extra amenities—these must be disclosed during booking, not just at check-in.
Credit card surcharges: Legal for credit cards if disclosed in advance, up to the actual cost of processing.
Convenience/processing fees: Added to online orders, delivery, or ticketing services.

Can You Refuse to Pay a Service Charge?

If a service charge was properly disclosed before you made your purchase or placed your order, you are generally required to pay it. If you were not informed ahead of time, or feel a fee was misleading, you may dispute it or file a complaint with the Delaware Attorney General’s Consumer Protection Unit.

Are Service Charges Taxed in Delaware?

Delaware does not have a state sales tax, so most service charges are not subject to sales tax. However, some localities may have their own rules, and federal taxes may still apply to specific transactions.

Employer Rules: Service Charges and Employee Pay

Service charges collected by a business belong to the business—not automatically to employees. Employers may choose to use these funds for payroll or operations, but if they promise to share service charges with staff, they are required to follow through. Employees should check pay stubs and ask questions if unsure.

How to Spot and Avoid Surprise Fees

Read menus, booking confirmations, or order screens for any mention of extra fees.
Ask before ordering: “Are there any service charges or extra fees I should know about?”
If you discover a fee that wasn’t disclosed, ask to speak with a manager or file a complaint with the state.

Helpful Resources

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

Delaware businesses can add service charges, but only if they’re honest and upfront about them. As a customer, your best move is to read before you pay and speak up if you think a fee wasn’t properly disclosed. For business owners, transparency and accurate labeling will protect you from unhappy customers and legal headaches.