Which States Prohibit Tip Credit

The seven full-cash states

In these states you cannot use the federal $2.13 tip-credit cash wage:

Alaska · California · Minnesota · Montana · Nevada · Oregon · Washington

You pay the full state minimum wage in cash. Tips are on top of that wage, not instead of it. Illustrative cash floors from the federal DOL compilation (July 1, 2026): Alaska $14.00; California $16.90 general; Minnesota $11.41; Montana $10.85 standard (lower small-employer floor exists); Nevada $12.00; Oregon $15.55 standard / higher Portland metro / lower nonurban; Washington $17.13.

Everywhere else, a tip credit may still be allowed — but the cash floor is often higher than $2.13, and local rules can be stricter.

What multi-state employers get wrong

• Importing a federal $2.13 rate into a California or Washington location “because corporate payroll is in Texas.”
• Averaging cash wages across a week when a server works Nevada one day and Arizona the next — each day’s location sets its own floor.
• Deducting credit-card fees from tips in California (state law bans that even though federal law is more flexible).
• Assuming Hawaii is a no-tip-credit state — Hawaii allows a conditional small tip credit, not a full ban.

Fix the rate table first

Map every worksite to its cash floor. If the state is on the seven-state list, set cash wage to the full state minimum and turn tip credit off in payroll. Then re-check weekly make-up only where tip credit is still allowed.

When a location moves onto the list through a ballot or statute change, treat it like a minimum-wage increase: update hire packets, POS job codes, and the next schedule’s rates before the effective date.