What is a service charge?
A service charge is a percentage — typically 18–22% — added to the food-and-beverage subtotal that the venue keeps to cover service overhead like staff wages, setup, cleanup and breakage. It is not a tip: unlike a gratuity, the service charge belongs to the venue, not directly to the servers.
On a catering invoice it is one of the largest add-ons after tax, and one of the most misread — because guests assume it goes to staff the way a restaurant tip would.
What the percentage actually covers.
Running an event costs a venue far more than the food on the plate: servers and bartenders to hire, a captain to run the floor, setup and strike crews, linens, breakage and the general overhead of putting a room into service. Rather than itemise all of that, most venues bundle it into a single percentage — commonly 18–22% — applied to the food-and-beverage subtotal. That is the service charge. It appears as a line on the proposal and invoice, calculated before tax is added.
The critical point is where the money goes: a service charge is retained by the venue and used at its discretion, which may or may not include paying staff. A gratuity, by contrast, is intended to go directly to the service team. In many jurisdictions a mandatory service charge is treated as taxable venue revenue, while a voluntary gratuity is not — so the two are taxed differently, and the labelling matters. Rules vary by region and are tightening, so venues should state clearly what the charge is and check local law before quoting.
The most common mistake, on both sides, is treating the service charge as the tip. Guests who see "20% service charge" often assume staff are covered and add nothing; staff may see none of it unless the venue chooses to distribute it. Clear invoicing — a separate service-charge line and, where relevant, a separate gratuity line — avoids the confusion and the awkward disputes that follow.
Service charge vs gratuity.
| Service charge | Gratuity | |
|---|---|---|
| Who keeps it | The venue, used at its discretion | The service team, directly |
| Mandatory? | Almost always — a fixed % on the bill | Often optional; sometimes a mandatory add-on |
| Typical amount | 18–22% of the F&B subtotal | Varies; sometimes bundled with service charge |
| Taxable? | Usually yes | Usually no (varies by jurisdiction) |
Example: A $10,000 food-and-beverage subtotal carries a 20% service charge = $2,000, which the venue keeps toward staffing and overhead. Sales tax is then applied on top. Any gratuity the client chooses to add for the team is a separate line — and in many regions is not taxed.
- Gratuity — the tip that goes directly to staff, contrasted above
- F&B minimum — the subtotal the service charge is calculated on
- Corkage fee — another common line on the catering invoice
- Full banquet & catering glossary
Service charge — common questions.
Is a service charge the same as a tip?
Is the service charge taxable?
Service charge, tax and gratuity — on separate lines.
Set your service-charge percentage once and let every proposal and invoice calculate it cleanly, with tax and gratuity itemised. Try LightCater free for 14 days, no credit card to start.