This study examines the effects of server race, customer race and their interaction on restaurant tips while statistically controlling for the customers’ perceptions of service quality and other variables. The findings indicate that consumers of both races discriminate against black service providers by tipping them less than white service providers. Furthermore, this server race effect on tipping is moderated by perceived service quality and dining party size. The theoretical and practical implications of these findings are discussed. Particularly noteworthy is the possibility that the server race effect on tipping represents an adverse impact against black servers that makes the use of tipping to compensate employees a violation of employment discrimination law in the United States.