Sexual harassment from customers is prevalent and costly to service employees and organizations, yet little is known about when and why customers harass. Based on a theoretical model of power in organizations, we propose that sexual harassment is a function of employees’ financial dependence on customers (i.e., tips) and deference to customers with emotional labor (“service with a smile”) jointly activating customer power. With a field survey study of tipped employees who vary in financial dependence and emotional display requirements (Study 1), and an online experiment that manipulates financial dependence and emotional displays from the customer’s perspective (Study 2), our results confirm that these contextual factors jointly increase customer power and thus sexual harassment. Our research has important practical implications, suggesting that organizations can reduce customer sexual harassment by changing compensation models or emotional labor expectations in service contexts.