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Discount for Cash?

I ate dinner last night with my family at an Italian restaurant in Mt. Kisco, NY. It is a white tablecloth place, probably family run, old school Bronx kind of food. When the check came, I offered my credit card. After my card was rung, the waiter brought the receipt over for me to sign. On the receipt was written another price, i think it was 107.00 if using credit card, 97.00 cash. (Light dinner for 3).

Am I missing something here or are the owners of this restaurant blatantly dissing the tax man? I would normally just accept the discount offer as a chance to save a couple of bucks, but while i really like the food at this place, the 2 times I have dined there, the service was inattentive, and it seemed like "regulars" got much better service.

Thus, I am throwing this out to you for debate. If you want to try the place, the name is Piero's II.

If I didn't feel that the staff's attitude was lousy, I would have thought it was a good deal. But on second thought, isn't it kind of audacious to brazenly dis the IRS?

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  1. There is an expense to the restaurant for using a credit card. They usually pay a percentage of the amount charged plus a flat per transaction fee. There have been problems in the past with people putting tips on credit cards-- does the waiter get the full tip or the amount less the credit card percentage charge. Cash doesn't have these problems. Could it be a "dis the IRS"? Sure, but it just might be avoiding the hassles of credit cards.

    2 Replies
    1. re: debmom

      There are laws against charging customers to cover your credit card fees, although I'm not versed enough to give you the details. And it's been proven that when people use a credit card to pay, they usually spend 30% more than if they used cash. So not sure what their angle might be. But if they're doing this to try to get around paying taxes, the wrong customer is going to dine there someday and turn them in.

      1. re: coll

        There are no laws against charging customers to cover your credit card fees. Most card companies forbid charging an additional fee to credit card users as part of their member agreements, but offering a discount for cash is ok.

        Also, if the cash discount isn't shown until you get the bill, it's highly unlikely that the customer is going to stop and order another 30% worth of food -- the meal is done by that point.

        Card issuers charge fees, and they may just not want to pay them. Lots of places are cash only for this reason. There's absolutely no reason to believe that this place is up to any shenanigans, on their taxes or with the card companies. It's possible, but there lots of innocent explanations too.

    2. straight off the menu prices + tax, would the total have been $107?

      the tax is usu. already figured into the final tab, right? if so it's going to be paid as a % out of what ever the customer leaves whether 97 or 107.

      in addition to the card fees, it can also take a few months before the restaurant actually sees payment from your card company for the tab.

      as an often card user I do tend to blow more (hey! it's not real, it's plastic!) but if I have the cash on me I leave the tip in that form and write "cash' on the tip line of the slip.

      I'd think there weren't shenanigans going on, in fact offering a 10% discount for using cash. maybe they needed to pay a vendor. fast.

      yes I am capable of blowing smoke up my own @** but I don't think so in this case.

      8 Replies
      1. re: hill food

        "t can also take a few months before the restaurant actually sees payment" Nope. A couple of days, and it will show up in their bank account. The owners probably just prefer cash in hand to a deposit in a few days for convenience sake. It's probably totally legit.

        1. re: Catskillgirl

          I'd always heard of massive delays, if I'm wrong so much the better. I've also lived on such a tight margin that a day or two can cause big problems. I agree it sounds ok, just not what many are willing to evaluate off the cuff. No offense to the OP, many of us aren't prepared for the odd situation.

          If I were the owner I'd def. prefer cash in hand.

          1. re: hill food

            That did use to be the case, but with the electronic terminals, all transactions are closed out (automatically) at the end of the night, even if the resto forgets to do it. And with the electronic banking changes over the last few years, I think 3 days is really the max it could take to show up in their bank account.

            There are always ways to defraud Uncle Sam, but I'd think that restaurant's books are just as open to auditing as any other business. For my business, cash in hand is just easier to deal with. And I keep records of all cash paid in and paid out. Lots of my vendors love to be paid in cash as well. Just for convenience.

            1. re: Catskillgirl

              that's kinda what I thought (tax-fraud wise) and if they brought over a printed bill, it's bound to be stored/backed up on their system somewhere and therefore indictable. - heads up folks 'delete' doesn't always really delete.

              1. re: Catskillgirl

                Do you own the business, as one of my friends has a small business, and says that the credit cards payments can run more than 5 days. This does hurt her is business is slow at any given time..

                1. re: Catskillgirl

                  Depends on what the equipment setup is. Many small places still have manual close out (like mine) with maybe a transaction block after 48 or 72 hours.
                  Deposits also depend on the processing company and can take anywhere from 48 to 72 hours to show up in the bank. No deposits made on non-banking days.

                  Re the "spend more with credit" fallacy - How many people has anyone seen that actually sits down and orders 30% more of a meal when using plastic????
                  In clothing stores, electronics, etc, yeah. But not at food only restaurants.

                  1. re: hannaone

                    Not a fallacy; it's been proven many times.

                    If we go to a restaurant with a budget of x amount in cash for a meal, we'll stick with it because, well, that's all we've got. This might mean not ordering apps or dessert, might mean fewer drinks, etc. Honestly, I do think that in restaurants people spend more with credit on drinks than food; your point about ordering 30% more food is well taken, but I think it's a matter of just what food you order (lobster v meatless pasta, for example) and what extras you add on including how much you drink. With cash, you plan what you'll order according to how much money you have in hand. With credit, you might throw caution to the wind and either order more expensive items and/or keep ordering more wine with abandon.

                    1. re: thedoorchick

                      This was from personal experience
                      My restaurant served food only, no alcoholic beverages.
                      All menu items priced from $8.99 to $13.99.
                      Menu price included all sides, so no extra orders possible.
                      No deserts.

                      Changing from cash only to accepting credit/debit cost me enough to force a price increase to cover the loss.
                      No new business was generated, and my regulars switched from cash to plastic without ordering that "promised" larger amount.
                      That's why I said fallacy in the case of small "food only" restaurants.

                      The Merchant processing companies want all merchants to believe that just by accepting plastic their business revenue will increase, but this just isn't true for everyone, and can actually result in an overall loss of revenue for some..

          2. A lot of times restaurants are able to get a line of credit off their historical credit card receipts.

            Say a restaurant borrows $15,000 from American Express. American Express then keeps every penny that goes through on their credit card machine until the 'loan' is paid in full with interest.

            When a restaurant does this it is usually because it is cash strapped.

            That is maybe why they offered you a discount for paying cash.

            Just a guess and I don't know if it is legal everywhere but it is in South Carolina.

            It is a hard hole to dig yourself out of.

            1. The only thing that seems odd about what you describe is the dollar amount of the discount for cash. There is no card processor I've ever heard of that charges a restaurant almost 10% ($10 on a $107 check) for card processing. That's a lot of discount for cash, so I can understand thinking that they could be paying to encourage cash. But if the restaurant offers a discount for anything (cash or an early bird special) I don't think they are automatically 'dissing' the IRS at all. If they pocket the cash, that's a different story.

              1. Offering a cash discount is fairly common with a lot of small places and has absolutely nothing to do with dodging taxes.
                Since credit card companies have policies and company made rules (not laws) that prohibit merchants from charging more for credit transactions (to recover sometimes exorbitant fees and charges), the merchant will have a "regular" price and a cash discount option.

                1. getting paid in cash means the bill is final. There is no chance of a chargeback later from the customer. Chargebacks do happen.

                  However, I think they would either prefer not to pay the % fee to the card co, and the transaction fee, although the 10% discount is more than the fees. Perhaps they are trying to encourage custom by offering the discount. Or, they have bills to pay and want the turnover.

                  1. I don't know if there are laws regulating cash discounts in the restaurant industry but in the medical field, we are only allowed to give a cash discount (excluding insurance) if it's equivalent to the extra costs associated with a person using a credit card -- the transaction fee (mine is 22 cents) + the percentage (guess it could be anywhere from 2-4% depending on merchant). If you factor in insurance, I think you're only allowed to discount about 10% for factoring in the cost of billing services. Whether or not they adhere to these rules is another story.

                    If restaurants are supposed to follow the same conduct for medical establishments (and I really have no idea if they do), the $10 discount for a $107 bill seems a bit high to me.