Utility Studies

What Restaurants Should Know about Sales Tax

sales tax that restaurants must be aware of

Tax season may be over, but does this mean businesses should put taxes and fees out of their heads completely? It may seem restaurants and other food and beverage-related businesses don’t have to worry about sales tax, but that isn’t the case.

Every plate of food bought at your restaurant comes with a sales tax tag.

Owners of restaurants and other such establishments are bound by federal and state law to collect this tax responsibly and present to the respective department. Do you know what exactly you’re dealing with? It’s a good idea to arm yourself with sales tax knowledge that concerns your restaurant.

Sales Tax for Restaurants – What Is It

Restaurants are required by state law to collect a sales tax (set by the government) on all food, beverage, and other related item sold at the establishment. Once collected, the money goes to the respective state department.

Percentage of sales tax varies by state to state and even by city to city, considering they also have this tax applicable to various jurisdictions. How much sales tax percentage is usually expected from restaurants? Anywhere between 5-10 percent mark, which can have a really big effect on your business.

Sales Tax on Food for Resale

Food exclusively set for resale at a restaurant will be exempt from sales tax at the time of purchase. You may have to show your supplier resale certificate as proof of food purchase for the sole purpose of resale.

Exemption from Sales Tax in Indiana – Here’s What You Should Know

Are you paying a lot more sales tax than the expected payable amount?

Unlike other states, Indiana offers exemption from sales tax to restaurants. In fact, these establishments are termed as food production manufacturers under state sales tax exemption laws.

7% of Possible Savings on Purchase of Equipment and Utilities

In addition to food production meant for resale, purchase of equipment and utilities usage directly used in food production also comes under Indiana sales tax exemption law.

How to claim this exemption? Present your vendor with a completed exemption certificate (Form ST-105) prior to purchase of equipment and utilities.

Restaurant owners can also submit a refund claim if they had previously paid sales tax on exempted equipment by mistake.   

Navigating through confusing Indiana sales tax laws and determining which exemptions your business is eligible for can be a bit tricky. You can seek professional help and consultation in this matter from Enguard’s brightest minds.

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