California restaurant surcharge laws allow restaurants, bars, grocery stores, and catering operations to add mandatory fees to your bill, but only if those fees are clearly disclosed wherever the prices appear. If the surcharge is spelled out on the menu with its purpose, you’ve agreed to pay it by ordering. If it shows up for the first time on your receipt, the restaurant is likely breaking the law.
When a Restaurant Surcharge Is Legal
California’s Honest Pricing Law, Senate Bill 478, took effect July 1, 2024 and generally bans businesses from advertising a price that leaves out mandatory fees.1Codified in California Civil Code Section 1770(a)(29). Restaurants got their own carve-out through Senate Bill 1524, which amended the same section of the Civil Code. Under that exemption, a restaurant can list a $22 entrée on the menu and add a separate 5% surcharge on the bill, as long as the surcharge is disclosed where prices are shown.
The exemption isn’t limited to sit-down restaurants. It also covers bars, food concessions, grocery stores, grocery delivery services, and banquet or catering operations. It does not cover third-party food delivery platforms. If you order through an app that isn’t owned by or under contract with the restaurant or grocery store, that platform has to follow the standard all-in pricing rules and can’t break out separate mandatory fees beyond taxes and delivery charges.
A surcharge counts as “mandatory” if you have no choice about paying it. Typical examples include a flat percentage added to every check for employee healthcare, a service charge on parties above a certain size, or a kitchen appreciation fee. If the restaurant lets you opt out, it isn’t mandatory and these rules don’t apply.
How the Disclosure Has to Look
Civil Code Section 1770(a)(29)(D)(ii) requires that any mandatory fee be “clearly and conspicuously displayed, with an explanation of its purpose, on any advertisement, menu, or other display that contains the price of the food or beverage item.” That translates into three practical requirements: the surcharge has to be visible, it has to appear wherever prices appear, and it has to say what it’s for.
A restaurant can’t bury the notice in small print at the bottom of a multi-page menu or on a sign posted only near the restrooms. If prices appear on a website, the surcharge disclosure has to be there too. If they appear on a digital kiosk or a QR-code menu, the fee has to show up in the same place. The purpose must be stated plainly, something like “4% employee healthcare surcharge” or “3% kitchen wage supplement.”
Formatting Rules After July 2025
Starting July 1, 2025, SB 1524 tightened the formatting rules. Any required disclosure must now meet the definition of “clear and conspicuous” found in Civil Code Section 1791. The text can’t be significantly smaller than surrounding menu text, and it can’t be rendered in a color that blends into the background. A tiny-font footnote at the bottom of the menu no longer satisfies the law.
Does the Surcharge Get Taxed, and Does It Go to the Server?
A surcharge is not a tip, and California treats the two very differently. An optional tip you choose to leave belongs to the employee under California Labor Code Section 351. A mandatory surcharge belongs to the restaurant unless it’s specifically designated as a gratuity. When a restaurant adds a “20% service charge” to your bill, that money doesn’t automatically go to your server. California courts have found that a mandatory service charge can sometimes qualify as a gratuity that must be passed through to employees, but the line depends heavily on how the charge is labeled and presented.
Tax treatment is more straightforward. The California Department of Tax and Fee Administration treats mandatory surcharges as part of the restaurant’s taxable gross receipts, so sales tax applies to the surcharge amount just as it applies to the food. An optional tip is not subject to sales tax. If your $100 dinner tab includes a mandatory 5% surcharge, you’ll pay sales tax on $105, not $100.
Credit Card Fees Are a Separate Issue
Some restaurants add a fee when you pay by credit card. That’s a different rule from the menu surcharge rules above. California originally banned credit card surcharges in 1985 through Civil Code Section 1748.1, but a 2018 federal court decision effectively made that ban unenforceable. The Attorney General’s office has said it will generally apply the court’s reasoning broadly, so restaurants can charge a credit card processing fee as long as they disclose it before the transaction. They’re also allowed to offer a discount for paying with cash or debit. A “3% card processing fee” that first appears on your receipt, with no prior notice, is a potential violation.
What You Can Do About an Undisclosed Surcharge
Keep the menu, or a photo of it, and your final receipt. Those two documents are what prove a surcharge wasn’t disclosed where the prices were.
You can file a complaint with the California Department of Justice through its consumer protection portal at oag.ca.gov. The Attorney General, district attorneys, and qualifying city attorneys can bring actions under the state’s Unfair Competition Law, with civil penalties of up to $2,500 per violation and an additional $2,500 where the violation targets a senior citizen or a person with a disability.
You can also sue the restaurant yourself. Civil Code Section 1780, part of the Consumers Legal Remedies Act, lets a consumer harmed by a violation of Section 1770 recover actual damages, restitution, and in some cases punitive damages. The court must award attorney’s fees to a consumer who wins, which is what makes it realistic for a lawyer to take the case. In class actions, the minimum total damages award is $1,000. Senior citizens and people with disabilities can recover an additional $5,000 per person when the violation caused substantial harm. For a modest individual dispute, small claims court is often the simpler route.
When You Can’t Push Back
If the restaurant followed the disclosure rules, the surcharge is part of the price you agreed to pay by ordering. You can’t refuse to pay it after the meal any more than you could refuse to pay the listed price of an entrée. Your remedy in that situation is to eat somewhere else next time. The law protects you against surprise, not against surcharges you were told about and chose to accept.