People assume if you pay cash there is no tip trail. Too bad the IRS isn't as dumb as we'd like to think. They expect you to make a base level of tips, they know if you're not making that base level you would not work there. Same for waiting tables or working a bar.
This is a little better insight on how it really works if done the correct way and not under the table as in employees being paid and getting a legit check.
If an employer is paying someone under minimum wage meaning 3 or 4 bucks an hour + tips when it comes to submitting payroll, the employer must submit that the employee made enough tips to cover the difference from minimum wage and their base 3-4 dollar wage. If the tips is not enough to cover the difference, the employer must pay the difference. A lot of businesses will assume tips and claim enough tips on behalf of the employees so that they wont have to pay them the difference to match minumum wage, this is pretty common practice and if the server/delivery guy makes less then enough tips to cover the gap, then the employee gets screwed and the business saves money since they put down that the employee made enough tips to cover that min wage gap. I've seen this at too many places. I've even run across it at our place, but we end up paying out the difference, then what do we do? I figure that 1 of two things happened. either a. we don't need that many servers/bussers and cut back hours, or B. the server really sucks and needs be let go because he can't pull his weight in tips.
If a tipped employee is showing a common trend of getting less tips aka cash tips. it places the person into the high risk audit category and that just opens a whole can of warms. However, most of that falls back on the business since the business is who handles keeping track of tips to make sure that tipped employees meet the min wage requirement.
If a delivery guy is drawing a line through the tip spot, he could be double dipping saying he got stiffed causing the business to pay out the difference in the tipped wage and min wage.
The only upside to tips and taxes is the IRS only assumes 10-15% so if you're busting out 20-25% you can play with your #s a bit, as long as you show that your tips are in the 10-15% range and that you make enough to cover the difference in payroll to meet min wage. Thankfully most servers who pull their weight can do 15-25 an hour easily so that's never an issue.
Yes I do payroll.
I'll say it again, call and ask a manager.