Final answer:
Tip allocations are necessary when total reported tips are less than 8% of the employer's gross receipts. This is a tax reporting requirement designed to ensure accurate reflection of tips received by employees.
Step-by-step explanation:
The question asks about the percentage of an employer's gross receipts that must be met by tip reporting to avoid tip allocations. The Internal Revenue Service (IRS) requires that the total tips reported by employees must amount to at least 8% of the employer's gross receipts. If the reported tips are less than this percentage, the employer must allocate additional tips to the employees' income. This process is to ensure that the reported tips are accurately reflecting the tips received, and is primarily related to tax reporting requirements for industries where tipping is customary.