SECTION 4. REQUIREMENTS FOR

SITCA APPLICANTS

.01 To be eligible to participate in the SITCA program, a SITCA Applicant must meet the following requirements:

(1) Length of time in operation . A SITCA Applicant must have operated as an employer in a Service Industry for at least one completed calendar year immediately

preceding the date the SITCA Applicant applies to participate in the SITCA program.

(2) Covered Establishments . A SITCA Applicant must have one or more Covered Establishments. The Covered Establishments may all share the same Service Industry, or they may operate in a different Service Industry.

(3) Compliance . The SITCA Applicant must be in compliance with Federal, state, and local tax laws during the following periods, as applicable: (1) the Requisite Prior Period, (2) the period that a SITCA Application is pending, and (3) the period between acceptance into the SITCA Program and the start of the next calendar year, taking into consideration any applicable IRS relief provisions (collectively referred to as the applicable periods). The SITCA Applicant must timely and accurately file all Federal, state, and local tax and information returns (including Federal employment tax returns) and deposit and pay any applicable Federal, state, and local tax (including any Federal employment taxes), during the applicable periods. A SITCA Applicant that fails to satisfy this requirement may be considered in compliance if the failure to comply is determined to be due to reasonable cause and not due to willful neglect.

(4) No fraud penalties . The SITCA Applicant must not have been assessed any fraud penalties by the IRS or a state or local tax authority during the applicable periods.

(5) Gaming Industry Tip Compliance Agreement (GITCA) program . The SITCA Applicant must not be a participant in the GITCA program or a gaming industry employer that is eligible to participate in the GITCA program.

.02 Eligibility of Covered Establish- ments . A SITCA Applicant must establish that each Covered Establishment submitted with its SITCA Application individually satisfies the following requirements:

(1) Time and Attendance System. The Covered Establishment must utilize a Time and Attendance System for Service Industry Tipped Employees to report all tips received in the course of their employment, which includes tips paid in cash, by credit card, debit card, gift card, or by any other form of electronic settlement or digital payment.

(2) POS System . The Covered Establishment must utilize a POS System to record all Sales Subject to Tipping during the calendar year and must accept the same forms of payment for tips as it does for Sales Subject to Tipping. The POS System must be able to determine both the Tips by Charge and the Covered Establishment Sales Subject to Charge Tipping for the calendar year.

(3) Minimum Reported Tips for Cov- ered Establishment . The Covered Establishment must satisfy the Minimum Reported Tips Requirement for the prior completed calendar year.

(4) Employee Tips Report (ETR) . The Covered Establishment must provide an ETR to each Service Industry Tipped Employee showing the amount of tips reported by the Service Industry Tipped Employee as reflected in the Time and Attendance System for that Covered Establishment, no less frequently than every calendar month.

.03 IRS Discretion . The IRS has the discretion to determine whether acceptance of a SITCA Applicant and each of its Covered Establishments is in the interest of sound tax administration.

.04 Suitability of Large Food or Bever- age Establishment for SITCA program . A Covered Establishment that is also a Large Food or Beverage Establishment generally will not be suitable for the SITCA program if it allocates tips to Service Industry Employees under section 6053(c).

SECTION 5: APPLYING TO PARTICIPATE IN THE SITCA PROGRAM

.01 Method of submission . A SITCA Applicant must electronically submit a properly completed and executed SITCA Application along with all accompanying forms and documentation required by this revenue procedure, the instructions in the online application, and any subsequent applicable guidance. A paper submission will be treated as an incomplete application as described in section 5.06 of this revenue procedure.

.02 Required documents, represen- tations and information. As part of the SITCA Application, a SITCA Applicant must submit certain documents, representations, and information, as well as any

Bulletin No. 2023–6 461 February 6, 2023

additional materials the IRS requests to determine a SITCA Applicant’s suitability for the SITCA program.

(1) A SITCA Applicant must provide a representation that the SITCA Applicant is in compliance with Federal, state, and local tax laws for the Requisite Prior Period (taking into consideration any applicable IRS relief provisions). Any failure to comply must be determined to be due to reasonable cause and not due to willful neglect. Documentation must accompany the representation that demonstrates the timely and accurate filing of Federal, state, and local tax and information returns (including Federal employment tax returns), and the timely and accurate deposit and payment of all applicable Federal, state, and local taxes (including any Federal employment taxes). The SITCA Applicant must also provide a representation that it has not been assessed any fraud penalties by the IRS or a state or local tax authority for any period during the Requisite Prior Period. The SITCA Applicant must provide these representations and documentation for every subsequent calendar quarter during which its SITCA Application is pending for some or all of the quarter. These representations and documentation must be provided by the last day of the second month after the end of each such subsequent quarter, even if the SITCA Applicant receives a notice of acceptance before this deadline.

(2) If applicable, a SITCA Applicant must provide information relating to its participation in any other existing tip reporting programs (TRAC, TRDA, or EmTRAC) with the IRS, including providing copies of tip reporting agreements, annual filing requirements, reports, tip rate reviews, and compliance reviews for the Requisite Prior Period. If participation in another tip reporting program has been for less than the full three-year Requisite Prior Period at the time the SITCA Application is submitted, the SITCA Applicant must provide the information described in this paragraph for the shorter period in which the tip reporting agreement was in effect. The SITCA Applicant must provide the information described in this paragraph for every subsequent calendar quarter during which its SITCA Application is pending for some or all of the quarter. This information must be provided by the last

day of the second month after the end of each subsequent quarter, even if the SITCA Applicant receives a notice of acceptance before this deadline.

(3) A SITCA Applicant must provide a statement of agreement signed by an individual authorized to sign on behalf of the SITCA Applicant that states, “On behalf of the SITCA applicant, I agree that the review of records and information under

[Revenue Procedure XXXX-XX], including the instructions in the online application, and any subsequent applicable guidance does not constitute an inspection within the meaning of section 7605(b) of the Internal Revenue Code (Code) and will not preclude or impede (under section 7605(b) of the Code or any administrative provisions adopted by the Internal Revenue Service (IRS)) the IRS from later examining any return or inspecting any records of the SITCA Applicant or of the Service Industry Employer, should the SITCA Applicant be accepted into the SITCA program. I further agree that procedural restrictions, such as providing notice under section 7605(b) of the Code, do not apply to actions taken under [Revenue Procedure XXXX-XX], including the instructions in the online application, and any subsequent applicable guidance.”

(4) A SITCA Applicant must provide a penalties of perjury statement signed by an individual authorized to sign on behalf of the SITCA Applicant that states, “Under penalties of perjury, I declare that I have examined this submission, including accompanying documents, and, to the best of my knowledge and belief, the facts presented in support of this submission are true, correct, and complete.”

(5) If a SITCA Applicant utilizes the services of a third party to submit the SITCA Application, the SITCA Applicant must ensure that the third party has a valid Form 2848, Power of Attorney and Dec- laration of Representative, for the SITCA Applicant on file with the IRS.

.03 Participation of Covered Establish- ments . With its SITCA Application, the SITCA Applicant must provide information about each Covered Establishment it requests to participate in the SITCA program.

(1) Covered Establishment identifica- tion number . Each Covered Establishment shall have a unique identification number

that will be used in the SITCA Application and, if accepted, in the SITCA program. A Covered Establishment identification number shall be determined as follows:

(A) The first nine digits shall be the Service Industry Employer’s EIN.

(B) The next digit shall identify the type of Covered Establishment, with the categories as follows: (i) The number “1” signifies a Large

Food or Beverage Establishment (subject to section 6053(c) reporting requirements); and (ii) The number “2” signifies another

type of Service Industry establishment, including a non-Large Food or Beverage Establishment. (C) The last five digits are to differentiate between multiple Covered Establishments sharing the same EIN. For this purpose, the SITCA Applicant shall assign each Covered Establishment a unique five-digit number. For example, each Covered Establishment could be assigned a number beginning with “00001” and progressing in numerical sequence (i.e., “00002”, “00003”, “00004” “00005”) until each Covered Establishment has been assigned a number.

(2) Submission of additional informa- tion . The SITCA Applicant must submit the information set forth in this paragraph (2) on behalf of each Covered Establishment for the Requisite Prior Period. Specifically, the SITCA Applicant must submit:

(A) The name and address of each Covered Establishment, and verification that each Covered Establishment operates under the EIN of the Service Industry Employer;

(B) A summary of the Covered Establishment’s activities, including the sources of its receipts and the nature of its expenditures, as prescribed by the IRS in the SITCA Application;

(C) A description of the Covered Establishment’s Time and Attendance System and its tip reporting capabilities, as well as reports that include all Reported Tips by Service Industry Tipped Employees at that Covered Establishment;

(D) A description of the Covered Establishment’s POS System and reports that include all Sales Subject to Tipping and information describing what forms of payment (e.g. cash, credit card, debit card)

February 6, 2023 462 Bulletin No. 2023–6

are accepted in the POS System for tips and Sales Subject to Tipping at that Covered Establishment;

(E) Payroll reports for all employees, including all Service Industry Tipped Employees, employed by the SITCA Applicant at that Covered Establishment;

(F) A representation and supporting documents that establish that the Reported Tips for that Covered Establishment meet or exceed the Minimum Reported Tips Requirement needed to participate in the SITCA program under this revenue procedure and any subsequent applicable guidance.

.04 Time period to apply . A SITCA Applicant must complete and submit the SITCA Application during the time period determined by the IRS and provided in the instructions in the online application.

.05 Additional requirements for Large Food or Beverage Establishments . For SITCA Applications that include a Covered Establishment that is a Large Food or Beverage Establishment, the SITCA Applicant must also submit the Forms 8027, Employ- er’s Annual Information Return of Tip In- come and Allocated Tips, that were filed on behalf of that Large Food or Beverage Establishment for the Requisite Prior Period.

.06 Incomplete or inaccurate applica- tion . A SITCA Application must be complete and accurate. A SITCA Application is not complete or accurate if it is missing any item of information required by this revenue procedure, the instructions in the online application, and any subsequent applicable guidance. If an incomplete SITCA Application is submitted, the IRS generally will request from the SITCA Applicant the additional information needed for a completed SITCA Application. However, the IRS may deny an incomplete SITCA Application without requesting additional information.

.07 Additional information may be required . Even if a SITCA Application is complete, the IRS may request additional information or documentation if it determines that further information or documentation is necessary to evaluate a SITCA Applicant’s or Covered Establishment’s suitability to participate in the SITCA program. A SITCA Applicant should not send any additional information or documentation to the IRS unless the IRS requests the information. The IRS will not

consider any unrequested information or documentation received from the SITCA Applicant if the SITCA Application is otherwise complete unless the information pertains to a material change as provided in sections 5.08 and 6.05 of this revenue procedure, with respect to the accuracy of the SITCA Application.

.08 SITCA Applicant must notify IRS of material changes relevant to its SITCA Application . Within 30 days of its occurrence, a SITCA Applicant must notify the IRS of any change that materially affects the continuing accuracy of any information that was previously provided to the IRS as part of its SITCA Application. Examples of material changes include, but are not limited to, any change in the SITCA Applicant’s tax compliance, changes to the information provided about the Covered Establishments under section 5.03 of this revenue procedure, or discovery of significant errors or new facts relevant to information the SITCA Applicant provided to the IRS.

.09 SITCA Application may be with- drawn . A SITCA Application may be withdrawn only upon the request of the SITCA Applicant in the manner prescribed by the IRS. When a SITCA Application is withdrawn, the IRS may retain and use for tax administration the SITCA Application, all supporting documents, and the information submitted in connection with the withdrawn request.

.10 Denial of SITCA Application . The IRS may deny a SITCA Application when the SITCA Applicant fails to satisfy the requirements of this revenue procedure, the instructions accompanying the online application, and any subsequent applicable guidance. Denial of the SITCA Application means that no Covered Establishments that the SITCA Applicant has requested to participate have been approved to participate in the SITCA program. The IRS may also determine that a SITCA Applicant is not suitable for the SITCA program or that its participation is not warranted based on the facts and circumstances, including that its participation is not in the interest of sound tax administration. If the IRS denies a SITCA Application, it will issue electronically a notice of denial to the SITCA Applicant, which will provide further contact information for the SITCA Applicant, and the

reason for the denial. The notice of denial will not include an opportunity for review. Denial of a SITCA Application does not preclude an employer from reapplying to participate in the SITCA program in accordance with the provisions of this revenue procedure, the instructions accompanying the online application, and any subsequent applicable guidance.

.11 Acceptance into SITCA program . The IRS may accept a SITCA Applicant to participate in the SITCA program as a Service Industry Employer if the SITCA Applicant satisfies the requirements of this revenue procedure, the instructions accompanying the online application, and any subsequent applicable guidance. Upon acceptance into the SITCA program, the IRS will electronically issue a notice of acceptance to the SITCA Applicant. The notice of acceptance will include a list of the specific Covered Establishments that have been approved to participate in the SITCA program. While participation in the SITCA program will typically begin on the first day of the calendar year following a Service Industry Employer’s acceptance into the SITCA program, participation may begin on a different date as determined by the IRS and provided in the notice of acceptance.

SECTION 6: MAINTAINING COMPLIANCE WITH THE SITCA PROGRAM

.01 In general . To maintain compliance with the SITCA program for each calendar year, a Service Industry Employer and its Covered Establishments must continue to satisfy the eligibility requirements described in this section and sections 4.01 and 4.02 of this revenue procedure for the period that the Service Industry Employer participates in the SITCA program. This includes maintaining compliance with Federal, state, and local tax laws (taking into consideration any applicable IRS relief provisions). A Service Industry Employer that fails to satisfy this requirement will be considered to be in compliance if the failure to comply is determined to be due to reasonable cause and not due to willful neglect. The Service Industry Employer must also not have been assessed any fraud penalties by the IRS or a state or local tax authority during the period that a

Bulletin No. 2023–6 463 February 6, 2023

Service Industry Employer participates in the SITCA program.

.02 Method of Submission . Except as otherwise provided in this revenue procedure or other subsequent applicable guidance, the information and documents required in this section must be submitted electronically. A Service Industry Employer may utilize the services of a third party to submit the information and documents required under this section if the third party has a valid Form 2848, Power of Attorney and Declaration of Represen- tative, for the Service Industry Employer on file with the IRS.

.03 Annual Report . The Service Industry Employer must electronically submit a properly completed and executed Annual Report for the calendar year with respect to each Covered Establishment participating in the SITCA program. The due date for submitting the Annual Report is March 31 following the end of the calendar year. .04 Prescribed form . The Annual Report required by this revenue procedure shall be made in the manner and form prescribed by the IRS. The form required for the Annual Report and the accompanying instructions will be specified on www.irs. gov.

.05 Reporting of material changes . The Service Industry Employer must notify the IRS of any change that materially affects the continuing accuracy of any information provided to the IRS (material change) that is relevant to its compliance with the SITCA program, including both a modification to information that was previously provided as part of its SITCA Application and new information. The Service Industry Employer must notify the IRS of a material change no later than 30 days after the date of the material change. Material changes that must be reported in this section 6.05 include, but are not limited to:

(1) Any change to the information previously provided by the Service Industry Employer as part of its initial SITCA Application or subsequent requests for Covered Establishments to participate in the SITCA program that relates to business name or organization, EIN, address, or background information;

(2) Any change to the tax compliance information previously provided by the Service Industry Employer (1) as part of its initial SITCA Application, (2) for the

period that a SITCA Application was pending, (3) for the period between acceptance into the SITCA program and the start of the next calendar year, and (4) for any year that the Service Industry Employer is a participant in the SITCA program, including the discovery of any failure by the Service Industry Employer to timely and accurately file Federal, state, and local tax and information returns (including Federal employment tax returns) or deposit and pay any applicable Federal, state, and local taxes (including any Federal employment taxes);

(3) The assessment of fraud penalties by the IRS or a state or local tax authority against the Service Industry Employer for any year that the Service Industry Employer is a participant in the SITCA program, and during the Requisite Prior Period and the period in between acceptance into the SITCA program and the start of the next calendar year when a Service Industry Employer becomes a participant in the SITCA program;

(4) The discovery by the Service Industry Employer of tax fraud or criminal activity in the Service Industry Employer’s business that is in violation of Federal, state, or local laws;

(5) The commencement of an active IRS criminal investigation of the Service Industry Employer, or an entity that is a member of a controlled group that includes the Service Industry Employer, or a responsible individual as described in § 301.7705-1(b)(13) (substituting Service Industry Employer for CPEO everywhere it appears in § 301.7705-1(b)(13)). For purposes of this revenue procedure, a controlled group has the meaning given to such term by sections 414(b) and (c), § 1.414(b)-1, and §§ 1.414(c)-1 through 1.414(c)-(6). Additionally, entities that, but for their status as disregarded entities would separately be members of a controlled group that includes the Service Industry Employer, are treated as members of a controlled group that includes the Service Industry Employer; and

(6) The sale, transfer, or disposition of all or substantially all of the Service Industry Employer’s business, or the reorganization, spinoff or similar division, liquidation, dissolution, or closure of the Service Industry Employer business entity, directly or indirectly, regardless of whether the event is taxable or tax free.

SECTION 7: ANNUAL FILING REQUIREMENT FOR SERVICE INDUSTRY EMPLOYERS WITH LARGE FOOD OR BEVERAGE ESTABLISHMENTS

Participation in the SITCA program does not change the reporting requirements described in section 6053(c). Namely, it does not change the requirement that an employer must file a separate information return for each calendar year with respect to each Large Food or Beverage Establishment for which the employer’s employees perform services. Accordingly, a Service Industry Employer that has one or more Large Food or Beverage Establishments participating in the SITCA program must file a Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips (and Form 8027-T, Transmittal of Em- ployer’s Annual Information Return of Tip Income and Allocated Tips, if applicable) with respect to each of the Covered Establishments that is a Large Food or Beverage Establishment in order to remain in compliance with the SITCA program.

SECTION 8: ADDING COVERED ESTABLISHMENTS AFTER ACCEPTANCE IN THE SITCA PROGRAM

.01 In general . A Service Industry Employer may request that an additional Covered Establishment participate in the SITCA program after its SITCA Application has been approved. The request must be made electronically in the form prescribed by the IRS and in the time period specified on www.irs.gov.

.02 Approval . The IRS may approve a Covered Establishment’s participation in the SITCA program through the Service Industry Employer if the Covered Establishment meets the requirements of section 4.02 of this revenue procedure, and any subsequent applicable guidance, and the IRS determines that the Covered Establishment’s participation in the SITCA program is in the interest of sound tax administration. Upon approval of a Covered Establishment’s participation in the SITCA program, the IRS will notify the Service Industry Employer elec

February 6, 2023 464 Bulletin No. 2023–6

tronically. A Covered Establishment’s participation in the SITCA program will generally begin on the first day of the calendar year to which the approved request applies. If a Covered Establishment that is approved to participate in the SITCA program pursuant to this paragraph is subsequently removed for the same calendar year pursuant to section 9 of this revenue procedure, the provisions of section 9 will control when the removal will be effective for purposes of that Covered Establishment participating in the SITCA program.

.03 Requesting reinstatement after re- moval. A Service Industry Employer may request that a Covered Establishment that has been removed from the SITCA program pursuant to section 9.01 or 9.02 of this revenue procedure be reinstated after demonstrating compliance with section 4.02 of this revenue procedure, or any subsequent applicable guidance, for the three completed calendar years preceding the date of its request for reinstatement or another time frame as determined by the IRS. The IRS discretion under section 4.03 of this revenue procedure to determine whether the acceptance of a Covered Establishment into the SITCA program is in the interest of sound tax administration applies to any request to reinstate a Covered Establishment after removal from the SITCA program. The request for reinstatement shall be made electronically in the form prescribed by the IRS and specified on irs.gov.

SECTION 9: REMOVAL OF COVERED ESTABLISHMENTS

.01 Removal by Service Industry Em- ployer . A Service Industry Employer may voluntarily remove a Covered Establishment from the SITCA program for any reason by providing an electronic notice of removal to the IRS in the form prescribed by the IRS and specified on irs. gov. The removal will be effective retroactive to the first day of the calendar year in which the notice of removal is received. A Covered Establishment that is removed by the Service Industry Employer may not participate in the SITCA program unless and until the Service Industry Employer requests to reinstate a Covered Establishment pursuant to section 8.03 of this rev

enue procedure, or any subsequent applicable guidance, and the IRS approves the request.

.02 Removal by IRS . The IRS will remove a Covered Establishment from the SITCA program if, for the calendar year, the Covered Establishment fails to meet the requirements of sections 4.02 or 6 of this revenue procedure or any subsequent applicable guidance, or the IRS determines that the Covered Establishment’s continued participation in the SITCA program is no longer in the interest of sound tax administration. The IRS will notify the Service Industry Employer of the removal electronically. Determination of whether a Covered Establishment has met the requirements of section 4.02 of this revenue procedure for a calendar year will be made after the Service Industry Employer submits its Annual Report under section 6 of this revenue procedure for that calendar year. If a Service Industry Employer fails to submit its Annual Report under section 6 of this revenue procedure with respect to any Covered Establishment for the calendar year, the IRS may remove the Covered Establishment from the SITCA program at any time after the Annual Report was due without regard to whether the participation requirements of section 4.02 of this revenue procedure or any subsequent applicable guidance have been met. The removal will be effective retroactive to the first day of the calendar year to which the Annual Report applies or would have applied if no Annual Report is submitted. A Covered Establishment that is removed from the SITCA program by the IRS may not participate in the SITCA program unless and until the Service Industry Employer seeks to reinstate a Covered Establishment pursuant to section 8.03 of this revenue procedure, or any subsequent applicable guidance, and the IRS approves the request.

SECTION 10: WITHDRAWING FROM OR TERMINATING PARTICIPATION IN THE SITCA PROGRAM

.01. Withdrawal by Service Industry Employer . The Service Industry Employer may voluntarily withdraw from the SITCA program for any reason by providing

an electronic notice of withdrawal to the IRS in the form prescribed by the IRS. The withdrawal will be effective on the first day of the calendar year in which the notice of withdrawal is received. Upon a Service Industry Employer’s withdrawal from the SITCA program, all the Covered Establishments participating in the SITCA program through the withdrawn Service Industry Employer will also be removed from the SITCA program, effective on the same first day of the calendar year in which the notice of withdrawal is received.

.02 Termination by the IRS . The IRS may terminate a Service Industry Employer from the SITCA program if any of the following conditions are met:

(1) The Service Industry Employer notifies the IRS pursuant to section 6.05 of this revenue procedure that it is going out of existence;

(2) The IRS determines that the Service Industry Employer is no longer eligible under section 4 of this revenue procedure, or any subsequent applicable guidance;

(3) The Service Industry Employer fails to submit the Annual Report for the calendar year required under section 6 of this revenue procedure, or any subsequent applicable guidance;

(4) The Service Industry Employer utilizes a third-party payer to report and pay Federal employment taxes that is not a Covered Establishment and that treats itself as the employer for Federal employment tax purposes with respect to all or more than 50 percent of the Service Industry Employer’s Service Industry Tipped Employees for a period in excess of 12 months;

(5) All the Covered Establishments included in the SITCA program through the Service Industry Employer have been removed;

(6) The Service Industry Employer otherwise fails to meet the requirements of this revenue procedure, or any subsequent applicable guidance;

(7) The IRS determines that the Service Industry Employer’s continuation in the SITCA program is no longer warranted by the facts and circumstances, or is no longer in the interest of sound tax administration; or

(8) The IRS discontinues the SITCA program.

Bulletin No. 2023–6 465 February 6, 2023

SECTION 11: EMPLOYER PROTECTION FROM SECTION 3121(q) LIABILITY

For a Service Industry Employer that satisfies sections 4 and 6 of this revenue procedure with respect to a Covered Establishment participating in the SITCA program, the IRS will not assert liability pursuant to section 3121(q) with respect to that Covered Establishment unless the liability is based on (1) tips received by a Service Industry Tipped Employee where the asserted liability is based upon the final results of an audit or agreement of the Service Industry Tipped Employee, or (2) the reporting of additional tip income by a Service Industry Tipped employee. The protection from section 3121(q) liability provided under this section applies only to Service Industry Employers with Covered Establishments for the periods for which they have been approved to participate in the SITCA program pursuant to section 5.11 or section 8.02 of this revenue procedure. It does not apply to Service Industry Employers to the extent they have Covered Establishments that have been removed from the SITCA program pursuant to section 9.01 or 9.02 of this revenue procedure, for the period of time between a Covered Establishment’s removal and reinstatement (if applicable), or to the extent a Service Industry Employer has other business locations, either with tipped employees or without, that are not approved to participate in the SITCA program.