Maryland 2025 Regular Session

Maryland Senate Bill SB823 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3	EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4	4	[Brackets] indicate matter deleted from existing law.
5	5	sb0823
6	6
7	7	SENATE BILL 823
8	8	I3, K3, Q3 5lr1538
9	9	CF 5lr1537
10	10	By: Senator McCray
11	11	Introduced and read first time: January 28, 2025
12	12	Assigned to: Finance and Budget and Taxation
13	13
14	14	A BILL ENTITLED
15	15
16	16	AN ACT concerning 1
17	17
18	18	No Tax on Tips Act 2
19	19
20	20	FOR the purpose of establishing consumer protections related to service fees charged by 3
21	21	food service facilities; specifying the State minimum wage rate and tip credit amount 4
22	22	that is in effect for certain time periods; prohibiting certain employers of tipped 5
23	23	employees, beginning on a certain date, from including a tip credit amount as part 6
24	24	of the employees’ wages; allowing a subtraction under the State income tax for 7
25	25	certain qualified tips received by individuals during the course of employment; 8
26	26	allowing a person a credit against the State income tax for up to a certain amount 9
27	27	paid to an employee of the person based on the payment of certain wages and tips; 10
28	28	and generally relating to service fees, the payment of wages, tip credits, and State 11
29	29	income taxes. 12
30	30
31	31	BY repealing and reenacting, with amendments, 13
32	32	Article – Commercial Law 14
33	33	Section 13–301(14)(xlii) 15
34	34	Annotated Code of Maryland 16
35	35	(2013 Replacement Volume and 2024 Supplement) 17
36	36
37	37	BY repealing and reenacting, without amendments, 18
38	38	Article – Commercial Law 19
39	39	Section 13–301(14)(xliii) 20
40	40	Annotated Code of Maryland 21
41	41	(2013 Replacement Volume and 2024 Supplement) 22
42	42
43	43	BY adding to 23
44	44	Article – Commercial Law 24
45	45	Section 13–301(14)(xliv) and 14–1328 25
46	46	Annotated Code of Maryland 26
47	47	(2013 Replacement Volume and 2024 Supplement) 27
48	48	2 SENATE BILL 823
49	49
50	50
51	51	BY repealing and reenacting, with amendments, 1
52	52	Article – Labor and Employment 2
53	53	Section 3–413 and 3–419 3
54	54	Annotated Code of Maryland 4
55	55	(2016 Replacement Volume and 2024 Supplement) 5
56	56
57	57	BY repealing and reenacting, without amendments, 6
58	58	Article – Tax – General 7
59	59	Section 10–207(a) 8
60	60	Annotated Code of Maryland 9
61	61	(2022 Replacement Volume and 2024 Supplement) 10
62	62
63	63	BY adding to 11
64	64	Article – Tax – General 12
65	65	Section 10–207(qq) and 10–758 13
66	66	Annotated Code of Maryland 14
67	67	(2022 Replacement Volume and 2024 Supplement) 15
68	68
69	69	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 16
70	70	That the Laws of Maryland read as follows: 17
71	71
72	72	Article – Commercial Law 18
73	73
74	74	13–301. 19
75	75
76	76	Unfair, abusive, or deceptive trade practices include any: 20
77	77
78	78	(14) Violation of a provision of: 21
79	79
80	80	(xlii) Section 12–6C–09.1 of the Health Occupations Article; [or] 22
81	81
82	82	(xliii) Title 14, Subtitle 48 of this article; or 23
83	83
84	84	(XLIV) SECTION 14–1328 OF THIS ARTICLE; OR 24
85	85
86	86	14–1328. 25
87	87
88	88	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 26
89	89	INDICATED. 27
90	90
91	91	(2) “FOOD SERVICE FACILITY ” HAS THE MEANING STAT ED IN § 28
92	92	21–301 OF THE HEALTH – GENERAL ARTICLE. 29
93	93
94	94	(3) “SERVICE FEE” MEANS A FEE ADDED BY A FOOD SERVICE 30
95	95	FACILITY TO A CUSTOM ER’S TOTAL CHARGE THAT IS SEPARATE FROM : 31
96	96	SENATE BILL 823 3
97	97
98	98
99	99	(I) THE PRICE LISTED ON THE ME NU FOR FOOD , DRINKS, OR 1
100	100	MERCHANDISE SOLD BY THE FOOD SERVICE FAC ILITY; AND 2
101	101
102	102	(II) ANY SALES TAX THE FOO D SERVICE FACILITY I S REQUIRED 3
103	103	TO COLLECT. 4
104	104
105	105	(B) A FOOD SERVICE FACILIT Y MAY NOT CHARGE A S ERVICE FEE UNLESS 5
106	106	THE FOOD SERVICE FACILITY PROMINENTLY DISCLOSES TO THE CUS TOMER ON THE 6
107	107	MENU OR IN A LOCATIO N THAT IS VISIBLE TO THE CUSTOMER BEFORE THE 7
108	108	CUSTOMER PLACES AN O RDER: 8
109	109
110	110	(1) THE AMOUNT AND PURPOS E OF THE SERVICE FEE ; AND 9
111	111
112	112	(2) WHETHER THE SERVICE F EE IS PAID DIRECTLY TO EMPLOY EES IN 10
113	113	ADDITION TO THEIR WA GES. 11
114	114
115	115	(C) A VIOLATION OF THIS SE CTION BY A FOOD SERV ICE FACILITY IS: 12
116	116
117	117	(1) AN UNFAIR, ABUSIVE, OR DECEPTIVE TRADE P RACTICE WITHIN 13
118	118	THE MEANING OF TITLE 13 OF THIS ARTICLE; AND 14
119	119
120	120	(2) SUBJECT TO THE ENFORC EMENT AND PENALTY PROVISIONS 15
121	121	CONTAINED IN TITLE 13 OF THIS ARTICLE. 16
122	122
123	123	Article – Labor and Employment 17
124	124
125	125	3–413. 18
126	126
127	127	(a) [(1)] In this section [the following words have the meanings indicated. 19
128	128
129	129	(2) “Employer”], “EMPLOYER” includes a governmental unit. 20
130	130
131	131	[(3) “Small employer” means an employer that employs 14 or fewer 21
132	132	employees.] 22
133	133
134	134	(b) Except as provided in subsection (d) of this section and § 3–414 of this subtitle, 23
135	135	each employer shall pay: 24
136	136
137	137	(1) to each employee who is subject to both the federal Act and this subtitle, 25
138	138	at least the greater of: 26
139	139
140	140	(i) the minimum wage for that employee under the federal Act; or 27
141	141
142	142	(ii) the State minimum wage set under subsection (c) of this section; 28
143	143	and 29 4 SENATE BILL 823
144	144
145	145
146	146
147	147	(2) to each other employee who is subject to this subtitle, at least the 1
148	148	greater of: 2
149	149
150	150	(i) the highest minimum wage under the federal Act; or 3
151	151
152	152	(ii) the State minimum wage set under subsection (c) of this section. 4
153	153
154	154	(c) [(1) Except as provided in paragraph (2) of this subsection, the] THE State 5
155	155	minimum wage rate is: 6
156	156
157	157	[(i) for the 12–month period beginning January 1, 2023, $13.25 per 7
158	158	hour; and 8
159	159
160	160	(ii)] (1) FOR THE 36–MONTH PERIOD beginning January 1, 2024, 9
161	161	$15.00 per hour[.]; 10
162	162
163	163	[(2) The State minimum wage rate for a small employer is: 11
164	164
165	165	(i) for the 12–month period beginning January 1, 2023, $12.80 per 12
166	166	hour; and 13
167	167
168	168	(ii) beginning January 1, 2024, $15.00 per hour.] 14
169	169
170	170	(2) FOR THE 12–MONTH PERIOD BEGINNI NG JANUARY 1, 2027, 15
171	171	$17.00 PER HOUR; 16
172	172
173	173	(3) FOR THE 6–MONTH PERIOD BEGINNI NG JANUARY 1, 2028, $18.50 17
174	174	PER HOUR; AND 18
175	175
176	176	(4) BEGINNING JULY 1, 2028, $20.00 PER HOUR. 19
177	177
178	178	(d) An employer may pay an employee a wage that equals a rate of 85% of the 20
179	179	State minimum wage established under this section if the employee is under the age of 18 21
180	180	years. 22
181	181
182	182	3–419. 23
183	183
184	184	(a) (1) Except as provided in § 3–1604(d) of this title, this section applies to 24
185	185	each employee who: 25
186	186
187	187	(i) is engaged in an occupation in which the employee customarily 26
188	188	and regularly receives more than $30 each month in tips; 27
189	189
190	190	(ii) has been informed by the employer about the provisions of this 28
191	191	section; and 29 SENATE BILL 823 5
192	192
193	193
194	194
195	195	(iii) has kept all of the tips that the employee received. 1
196	196
197	197	(2) Notwithstanding paragraph (1)(iii) of this subsection, this section does 2
198	198	not prohibit the pooling of tips. 3
199	199
200	200	(b) Subject to the limitations in this section, an employer may include, as part of 4
201	201	the wage of an employee to whom this section applies: 5
202	202
203	203	(1) an amount that the employer sets to represent the tips of the employee; 6
204	204	or 7
205	205
206	206	(2) if the employee or representative of the employee satisfies the 8
207	207	Commissioner that the employee received a lesser amount in tips, the lesser amount. 9
208	208
209	209	(c) (1) The tip credit amount that the employer may include under subsection 10
210	210	(b) of this section may not exceed the minimum wage established under § 3–413 of this 11
211	211	subtitle for the employee less [$3.63]: 12
212	212
213	213	(I) FOR THE 12–MONTH PERIOD BEGINNI NG JANUARY 1, 2027, 13
214	214	$12.00; AND 14
215	215
216	216	(II) FOR THE 6–MONTH PERIOD BEGINNI NG JANUARY 1, 2028, 15
217	217	$13.50. 16
218	218
219	219	(2) BEGINNING JULY 1, 2028, AN EMPLOYER : 17
220	220
221	221	(I) MAY NOT INCLUDE A TI P CREDIT AS PART OF THE WAGE OF 18
222	222	AN EMPLOYEE SUBJECT TO TH IS SUBTITLE; AND 19
223	223
224	224	(II) SHALL PAY AN EMPLOYE E A WAGE THAT IS AT LEAST EQUAL 20
225	225	TO THE STATE MINIMUM WAGE SE T UNDER § 3–413 OF THIS SUBTITLE. 21
226	226
227	227	(3) THIS SECTION MAY NOT BE CONSTRUED AS PROH IBITING THE 22
228	228	PAYMENT OF TIPS TO E MPLOYEES. 23
229	229
230	230	(d) (1) The Commissioner shall adopt regulations, in consultation with payroll 24
231	231	service providers and restaurant industry trade group representatives, to require 25
232	232	restaurant employers that include a tip credit as part of the wage of an employee to provide 26
233	233	tipped employees with a written or electronic wage statement for each pay period that 27
234	234	shows the effective hourly tip rate as derived from employer–paid cash wages plus all 28
235	235	reported tips for tip credit hours worked each workweek of the pay period. 29
236	236
237	237	(2) The Commissioner shall provide notification of the tip credit wage 30
238	238	statement regulations on the Department’s website. 31 6 SENATE BILL 823
239	239
240	240
241	241
242	242	Article – Tax – General 1
243	243
244	244	10–207. 2
245	245
246	246	(a) To the extent included in federal adjusted gross income, the amounts under 3
247	247	this section are subtracted from the federal adjusted gross income of a resident to determine 4
248	248	Maryland adjusted gross income. 5
249	249
250	250	(QQ) (1) (I) IN THIS SUBSECTION TH E FOLLOWING WORDS HA VE THE 6
251	251	MEANINGS INDICATED . 7
252	252
253	253	(II) “EMPLOYMENT ” MEANS WORK IN AN OCC UPATION OR 8
254	254	INDUSTRY IN WHICH AN INDIVIDUAL IS CUSTOMARIL Y COMPENSATED THROUG H A 9
255	255	COMBINATION OF WAGES AND TIPS, SUCH AS BARBERING , COSMETOLOGY , 10
256	256	HOSPITALITY, FOOD AND BEVERAGE SE RVICE, PARKING SERVICES , AND CUSTODIAL 11
257	257	SERVICES. 12
258	258
259	259	(III) “QUALIFIED TIPS ” MEANS TIPS RECEIVED BY AN 13
260	260	INDIVIDUAL DUR ING THE COURSE OF EM PLOYMENT THAT ARE PA ID TO THE 14
261	261	INDIVIDUAL BY AN UNR ELATED PARTY WHO DOE S NOT HAVE AN OWNERS HIP STAKE 15
262	262	IN THE BUSINESS PROV IDING THE EMPLOYMENT . 16
263	263
264	264	(2) THE SUBTRACTION UNDER SUBSECTION (A) OF THIS SECTION 17
265	265	INCLUDES THE AMOUNT OF QUALIFIED T IPS RECEIVED BY AN I NDIVIDUAL DURING 18
266	266	THE TAXABLE YEAR . 19
267	267
268	268	10–758. 20
269	269
270	270	(A) SUBJECT TO THE LIMITA TIONS OF THIS SECTIO N, FOR A TAXABLE YEAR 21
271	271	BEGINNING AFTER DECEMBER 31, 2026, BUT BEFORE JANUARY 1, 2029, A PERSON 22
272	272	MAY CLAIM A CREDIT A GAINST THE STATE INCOME TAX IN AN AMOUNT EQUAL TO 23
273	273	50% OF THE DIFFERENCE BE TWEEN: 24
274	274
275	275	(1) THE MINIMUM WAGE PAI D TO AN EMPLOYEE OF THE PERSON IN 25
276	276	ACCORDANCE WITH § 3–413 OF THE LABOR AND EMPLOYMENT ARTICLE; AND 26
277	277
278	278	(2) THE TIP CREDIT AMOUN T ALLOWED UNDER § 3–419 OF THE 27
279	279	LABOR AND EMPLOYMENT ARTICLE. 28
280	280
281	281	(B) (1) FOR ANY TAXABLE YEAR , THE TOTAL AMOUNT OF THE CREDIT 29
282	282	ALLOWED UNDER THIS S ECTION MAY NOT EXCEE D: 30
283	283
284	284	(I) THE STATE INCOME TAX IMPO SED FOR THAT TAXABLE 31 SENATE BILL 823 7
285	285
286	286
287	287	YEAR; OR 1
288	288
289	289	(II) $10,000. 2
290	290
291	291	(2) ANY UNUSED AMOUNT OF THE CREDIT FOR ANY T AXABLE YEAR 3
292	292	MAY NOT BE CARRIED O VER TO ANY OTHER TAX ABLE YEAR. 4
293	293
294	294	SECTION 2. AND BE IT FURTHER ENACTED, That this Act is contingent on the 5
295	295	passage of Chapter(s) ___(S.B. ___ or H.B. ___) (5lr1540 or 5lr1536) of the Acts of the 6
296	296	General Assembly of 2025, a constitutional amendment, and its ratification by the voters 7
297	297	of the State. 8
298	298
299	299	SECTION 3. AND BE IT FURTHER ENACTED, That, subject to Section 2 of this 9
300	300	Act, this Act shall take effect on the proclamation of the Governor that the constitutional 10
301	301	amendment, having received a majority of the votes cast at the general election, has been 11
302	302	adopted by the people of Maryland. 12
303	303