States Without Tip Credit 2026: The 7 States Where You Pay Full Minimum Wage

• Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington prohibit tip credits.
• Employers pay the applicable minimum wage before tips; tips do not fill a wage gap.
• Alaska and Oregon rates changed on July 1, 2026.
• State tip-pooling rules, overtime rules, and federal tax reporting still need separate review.

The states are Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In these states, an employee's tips cannot be used as a credit against the applicable employer-paid minimum wage.

That is the practical difference from a location using a permitted lower tipped cash wage: you fund the full required wage, and the employee's tips are additional compensation. The DOL tipped-wage reference separates this group from states that allow a credit.

The rule does not mean every worker in one state has an identical minimum rate. Local ordinances, industry rules, and limited coverage exceptions may matter.

The Alaska labor department confirms the July 1 increase to $14.00. Oregon BOLI publishes the three regional rates in force from July 1, 2026 through June 30, 2027. Before July 1, Oregon's corresponding rates were $14.05, $15.05, and $16.30.

For the other states, use the DOL reference and the applicable state or local wage notice. Montana's lower small-business exception is limited and does not override FLSA coverage. California also has higher minimums for some industries and cities. Do not use the general statewide figure as a universal payroll rate.

Keep the wage calculation and tip distribution in separate columns. For each employee, record hours, the applicable employer-paid rate, overtime, tip-pool allocations, voluntary tips, and service-charge wages.

A slow week in tips does not lower the wage owed. A strong week does not let the employer reclaim part of the wage. Reconcile employee tip records for tax reporting even though there is no minimum-wage credit to support.

Assume a California restaurant employee works 30 ordinary hours and is subject to the general $16.90 statewide minimum, with no higher local or industry rate. Direct wages are 30 × $16.90 = $507.00. If the employee also receives $300 in voluntary tips, those tips are additional to the $507.00 wage obligation.

Do not subtract the $300 from employer-paid wages. Also keep service-charge distributions separate; a mandatory charge paid to staff is not transformed into a voluntary tip simply because the state prohibits a tip credit.

Federal law permits some broader pools when an employer pays the full minimum wage without a tip credit, but state law can be more restrictive. For example, Minnesota's tip guidance explains limits on employer-required sharing.

Managers and supervisors remain excluded from receiving employee tip-pool distributions under the federal rules. Do not copy another state's pool design merely because both states prohibit tip credits. The tax occupation list is also not permission to include a role in a pool.

With no tip credit, you do not subtract a credit from the overtime wage. But the regular rate can still include distributed service charges, nondiscretionary bonuses, and other compensation. State daily-overtime requirements may also apply.

Use the overtime guide to distinguish wages owed from the FLSA-qualified premium reported under Code TT. A state-required premium is not automatically eligible for the federal deduction.

These seven states are not exempt from the new reporting fields. Employers still need cash-tip records and occupation mappings for 2026 W-2 reporting. The federal deduction does not eliminate applicable withholding or employment taxes.

For an employer expanding into a new state, compare three separate items: wage floor, pool rules, and payroll reporting workflow. Keeping those decisions separate makes mistakes easier to find.

Which states require full minimum wage before tips?

Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington prohibit tip credits. The applicable wage depends on state and local rules and coverage.

Is D.C. a no-tip-credit jurisdiction in 2026?

No. As of July 1, 2026, D.C. has an $18.40 general minimum and a $10.30 tipped cash wage, subject to its rules. It is not one of the seven states listed here.

Do employees in these states still need occupation codes?

If cash tips are reported under TP on a 2026 W-2, follow the Box 14b occupation-code instructions. A state ban on tip credits does not remove that federal reporting requirement.

Choose a completed payroll period and compare employee tip reports, pool transfers, and payroll tip entries. Confirm that the employer-paid wage was not reduced by those tips. Check pool eligibility under the law for the location before copying another restaurant's policy.

Use the free tip reconciliation worksheet to document differences. If several people maintain competing versions of the tip records, ask TipFort about a more consistent preparation process. Your payroll provider still needs reviewed amounts and occupation information for the year-end forms.