In the case United States v. Fior D'Italia, Inc., the U.S. Supreme Court ruled in favor of the Internal Revenue Service (IRS) over a dispute regarding how to calculate Social Security and Medicare taxes for restaurant employees who receive tips. The IRS had been estimating these amounts based on an aggregate estimation of tips received by all staff at Fior D’Italia, a San Francisco-based restaurant, rather than calculating individual employee's tip earnings. The restaurant argued that this method was unfair and resulted in them being overtaxed because it did not account for unreported or under-reported tips by their employees. However, the Supreme Court held that federal law allows such estimations as long as they are reasonable and administratively feasible. They also noted that restaurants have an opportunity to challenge any inaccuracies through tax court proceedings if they believe there is an error in calculation or assessment from IRS’s side.

In the dissenting opinion for United States v. Fior D'Italia, Inc., Justice Scalia argued that the Internal Revenue Service (IRS) overstepped its authority by estimating unreported tip income of restaurant employees and assessing employer's share of FICA taxes on it. He contended that such an approach was not supported by tax law or IRS regulations, which require employers to pay FICA taxes only on reported tips. The majority’s interpretation would allow the IRS to assess a tax based on estimated earnings rather than actual ones, setting a dangerous precedent for future taxation practices. Furthermore, he pointed out inconsistencies in how this method could be applied across different industries with tipped workers and criticized it as unfair and arbitrary.