Sales, Use and Local Taxes

Most of us are familiar with sales taxes. Almost every time we buy something from a local retailer, sales tax is added to our purchase price. As a restaurant owner, you also need to be familiar with the other side of the transaction. For most restaurateurs, sales tax collection and remittance is part of daily business.

The District of Columbia and 45 states have statutes requiring restaurateurs to charge a tax on sales made to its customers. Many counties and municipalities also impose local sales taxes.

Sales taxes are levied as a percentage of gross receipts from sales. This means that restaurateurs must collect sales tax on all sales of food, beverage, and miscellaneous items such as products sold from vending machines. These are remitted to the state usually on a monthly or quarterly schedule.

Tracking and remitting these sales taxes can be a paperwork demon. If you have a POS (point-of-sale) system, you can program it to track this for you. Make sure to contact your state and local taxing authorities for the proper rates for your location. Also, rates change from time to time. If your local rate changes, you will need to reprogram your POS system to calculate the new rate.

Many states have sales tax exemptions on the sale of food products. Restaurant sales, however, are taxable under sales tax laws or other rules in most states. In Arizona, food sold in grocery stores is exempt from tax, but food sold in restaurants, whether prepared there or someplace else, or consumed there or someplace else, is considered taxable sales. However, in California, some sales of cold food products (like cold sandwiches and salads) "to go" are not sales taxable, but carryout sales of hot prepared meals are taxable.