SB 823, the “No Tax on Tips Act,” would change Maryland law in several related ways affecting restaurant and other tipped-service workers, employers, and consumers. First, it creates a new consumer-protection rule for food service facilities that charge a service fee: the fee must be clearly disclosed on the menu or in a visible location before ordering, including the amount, purpose, and whether it is paid directly to employees. A violation would be treated as an unfair, abusive, or deceptive trade practice under Maryland’s consumer protection law.
The bill also phases in higher state minimum wages and changes the tipped wage system. It sets the State minimum wage at $17.00 beginning January 1, 2027, $18.50 beginning January 1, 2028, and $20.00 beginning July 1, 2028. For tipped employees, it reduces the allowable tip credit over time and then eliminates the tip credit entirely beginning July 1, 2028, requiring employers to pay tipped workers at least the full State minimum wage while still allowing tips to be paid on top of wages. The bill further directs the Commissioner of Labor and Industry to adopt regulations requiring certain restaurant employers using a tip credit to provide wage statements showing the effective hourly tip rate.
On the tax side, SB 823 would exclude qualified tips from Maryland taxable income and create a temporary State income tax credit for employers. For tax years beginning after December 31, 2026 and before January 1, 2029, an eligible person could claim a credit equal to 50% of the difference between the State minimum wage paid and the tip credit amount allowed, capped at $10,000 per year and limited to the tax due. The bill defines “qualified tips” and applies the subtraction to tips received in occupations commonly compensated by wages plus tips, including hospitality, food and beverage service, barbering, cosmetology, parking services, and custodial services.
The bill’s legal effect would be broad: it amends Maryland’s Commercial Law, Labor and Employment, and Tax-General Articles, creates new statutory sections, and ties the tax and wage changes to a separate constitutional amendment and voter ratification. In practical terms, it would reshape wage rules for tipped workers, impose new disclosure obligations on food service businesses, and provide income tax relief for tips while also offering a limited employer credit during the transition period.
Overall, the bill appears designed to benefit tipped workers and consumers through higher guaranteed wages, clearer fee disclosures, and tax relief on tips. Because there are no committee transcripts or recorded votes provided, there is no documented legislative debate in the supplied materials. The main likely points of contention are the elimination of the tip credit, the cost impact on restaurants and other employers, the higher minimum wage schedule, and whether the service-fee disclosure and tax-credit provisions are sufficient to offset those costs.
SB 823 would amend Maryland’s consumer protection, wage-and-hour, and income tax statutes. It adds a new unfair trade practice for undisclosed service fees at food service facilities, revises the State minimum wage schedule, phases out the tipped wage credit by July 1, 2028, requires wage-statement disclosures for employers using a tip credit, excludes qualified tips from Maryland taxable income, and creates a temporary employer income tax credit tied to the difference between the minimum wage and the tip credit. The bill’s effective date is contingent on a separate constitutional amendment and voter approval, so these changes would not take effect unless that condition is met.
Based on the bill text alone, the measure is pro-worker and pro-consumer in orientation, with clear benefits aimed at tipped employees and greater transparency for customers. No committee transcripts or votes were provided, so there is no recorded public sentiment in the supplied materials. The structure of the bill suggests support from advocates for wage increases and tip-income relief, while anticipating resistance from restaurant and hospitality employers concerned about labor costs and operational changes.
The most likely points of contention are the elimination of the tip credit, the rapid increase in the State minimum wage, and the compliance burden on food service businesses that charge service fees or use tipped wage arrangements. Restaurant and hospitality employers may object to higher payroll costs, while worker advocates may support the bill as a way to reduce dependence on tips and improve wage stability. The bill also conditions its effectiveness on a constitutional amendment, which indicates that the tax-related provisions may require broader political and public approval before implementation.