California: Publication helps restaurateurs manage tax issues

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According to the 2014 publication by the National Restaurant Industry, restaurants are a driving force in California’s economy.

The group reports that in 2013, there were 65,364 eating and drinking places in California, compared with almost one million nationwide. In addition:

  • Restaurant sales in California for 2014 were projected at $69.7 billion, compared with $683 billion nationwide. The nationwide figure represents four percent of the U.S. gross domestic product.
  • In 2014, restaurants accounted for about 10 percent, or 1.5 million jobs in California. 1.2 million of these jobs are “eating and drinking place” jobs, and the rest are non-restaurant food service positions. In the U.S., about 13.5 million people, 10 percent of the population, work in the restaurant industry.

In light of these numbers, it is not surprising that California is making an effort to assist taxpayers in the restaurant business. For example, in Tax Help for the Restaurant Industry (Tax Help), the California State Board of Equalization (BOE) recently published information to help restaurant owners and managers understand the particular sales and tax issues that impact them.

Tax Help offers a quiz that lets restaurants, caterers, and food truck operators test their knowledge. Here is a sampling of its questions:

  1. Are complimentary meals taxable? (Not usually, but complimentary carbonated and alcoholic beverages are subject to use tax that is reported and paid by the restaurant on the cost of the item.)
  2. Is hot food sold to-go taxable? (Generally yes, though “to-go” sales of hot bakery goods and hot non-alcoholic beverages, like coffee for a separate price, are usually not taxable.)
  3. Is cold food sold for dine-in taxable? (Generally yes, when it is to be eaten at the restaurant.)
  4. Is food that is not sold, but thrown out, taxable? (No, spoilage, shrinkage, and waste are not taxable but must be adequately documented in case of an audit.)

Tax Help encourages readers to visit the online Tax Guide For Restaurant Owners, which provides numerous resources on all aspects of running a restaurant, including: registration, filing returns, obtaining a seller’s permit, employee meals, discount coupons, sign posting requirements, recordkeeping, and inventory management. It also provides links to special notices, laws, and regulations, and informational pieces featuring topics such as Tips, Gratuities and Services (Publication 115), and Your California Seller's Permit (Publication 73).

Ongoing tax assistance efforts across industries

The BOE is committed to assisting all kinds of businesses in tax related matters. To this end, in mid-December, it issued a release notifying retailers in select Southern California zip codes about upcoming visits from the Statewide Compliance and Outreach Program (SCOP) team. According to the release, “the visits are intended to educate retailers about properly reporting sales and use tax, increase compliance with tax laws, and maintain outreach efforts to assure taxpayers that the state’s tax system is fair and equal for all Californians.”

The release further informs readers that since 2008, SCOP teams have visited nearly half a million businesses statewide. The teams found that more than 98 percent of the California businesses are operating with the correct permits, though noncompliance contributes to more than $2 billion in uncollected sales and use taxes. The BOE collects $56 billion annually in taxes and fees supporting state and local government services.

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