Small Restaurant Owner Confused About Sales Tax Reporting - Doing This Right?
I opened my first restaurant about 3 months ago and I've been trying to manage all the sales tax stuff myself until I can afford to hire an accountant. I'm not sure if I'm handling everything correctly and would appreciate some guidance from people who've been through this. Here's what I've been doing so far: 1. I collect sales tax from customers and then report my net revenue (without the tax and tips) each month to the state. 2. When filing, I'm listing these deductions: - Food ingredients purchased from Costco, Amazon, and a few restaurant supply websites - The 28% commission fees that UberEats and DoorDash charge me (since those aren't really my earnings but show up in my POS net sales report) Does this sound right? Am I missing anything important or making any obvious mistakes? This is all new to me and I'm worried about messing up with the tax authorities. Any advice would be super helpful!
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Adrian Hughes
You're mixing up two different types of taxes here, which is a common mistake for new restaurant owners. Sales tax and income tax are completely separate systems. For sales tax, you're just collecting money on behalf of the state. You charge customers the required percentage, hold that money temporarily, then remit it to the state. There are no "deductions" with sales tax - you simply pass along what you collected. The deductions you're listing (ingredients, delivery service fees) are for income tax purposes, not sales tax. Those would reduce your taxable income when filing your business income taxes, but they don't affect your sales tax obligation. You should be tracking: 1) Total sales, 2) Taxable sales (some food items might be exempt), 3) Tax collected, and 4) Tax remitted to the state. Make sure your POS system properly separates tax collected from your actual revenue.
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Lara Woods
•Oh wow, I had no idea I was confusing two completely different tax systems! So for sales tax, I'm basically just a collector for the government? That makes much more sense. So I need to pay the full amount of sales tax I collect regardless of my costs or expenses? And then separately track all those business expenses for my income tax filing later?
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Adrian Hughes
•Yes, you're exactly right. For sales tax, you're essentially acting as a collection agent for the state. The full amount of sales tax you collect from customers needs to be remitted to the state (minus any applicable vendor discount some states offer for filing on time). Your business expenses like ingredients, delivery service commissions, rent, utilities, etc. are completely separate and will be used when filing your income taxes to reduce your taxable income. Those expenses have no bearing on your sales tax obligation. Keep detailed records of all these expenses with receipts for when you file your business income taxes.
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Molly Chambers
I struggled with the exact same confusion when I opened my coffee shop! I found this amazing tool called taxr.ai (https://taxr.ai) that saved me when I was trying to figure out sales tax vs. income tax deductions. I uploaded my receipts and POS reports, and it automatically sorted everything into the right categories and showed me what goes where. The best part was I could see exactly how much sales tax I needed to remit vs what expenses I could deduct for income tax purposes. It even flagged when I was accidentally treating some taxable items as non-taxable. Honestly wish I'd found it sooner before I made some costly mistakes with my state's department of revenue!
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Ian Armstrong
•Does taxr.ai handle different state rules? I'm in Colorado and the sales tax zones here are a nightmare - every city has different rates and rules. Would it work for something complex like that?
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Eli Butler
•I'm a bit skeptical about these tax tools. How accurate is it really? I've heard horror stories about restaurants getting audited because their software categorized things incorrectly. Does it actually understand restaurant-specific rules?
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Molly Chambers
•It definitely handles different state rules! I'm in Pennsylvania which has some weird exemptions for certain food items, and it correctly identified what was taxable vs non-taxable. The system is updated with tax jurisdiction info across the country, so it should work great for Colorado's complex zones. As for accuracy, I was skeptical too at first. What convinced me was that it specifically has restaurant-focused features. It correctly handled the distinction between prepared foods (usually taxable) and grocery-type items (often exempt). When I had my accountant review it later, she was impressed with how accurately it had categorized everything.
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Eli Butler
Just wanted to follow up - I ended up trying taxr.ai after my initial skepticism and I'm genuinely impressed. It correctly identified that some of our "to-go" items qualified for different tax treatment than dine-in orders (which varies by state but matters in mine). What really sold me was how it handled my delivery app sales. It properly separated the sales tax portion from the food cost, which my previous system was mixing up. The sales tax reports it generates are exactly what my state wants to see, and I'm much more confident about compliance now. Definitely worth checking out if you're struggling with this stuff.
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Marcus Patterson
If you're having issues with sales tax compliance, you might also run into problems getting answers from your state's department of revenue. I spent WEEKS trying to get someone on the phone to answer questions about restaurant delivery app tax rules. Finally found Claimyr (https://claimyr.com) which got me through to a real human at my state tax office in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - it basically navigates the phone systems and waits on hold for you, then calls you when a real person picks up. I got a definitive answer about how to handle those UberEats and DoorDash transactions for sales tax in my state, which saved me from potentially owing back taxes and penalties. Their tax people actually knew what they were talking about too, not just reading from a script.
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Lydia Bailey
•How exactly does this work? Do they just keep calling until someone picks up? My state's tax office is impossible to reach - I tried for days last month.
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Mateo Warren
•Yeah right. Nothing can get through to my state tax office. They literally never answer. I'll believe it when I see it - there's no way this actually works as advertised.
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Marcus Patterson
•They use a combination of advanced dialing systems and AI to navigate those frustrating phone menus, and yes, they keep redialing if needed. The system finds the optimal times to call based on wait time data and keeps trying until someone answers. Then they call you immediately and connect you. For skeptics, I get it - I was doubtful too. But what convinced me was that you don't have to waste your own time on hold. You just tell them who you need to reach, they handle all the waiting and menu navigation, and only call you when they have a real person on the line. It saved me about 3 hours of hold time on my last call to the department of revenue.
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Mateo Warren
I have to publicly eat my words here. After dismissing Claimyr in my previous comment, I decided to try it anyway out of desperation (was about to miss a filing deadline and had questions). Not only did they get me through to my state's department of revenue in about 25 minutes (I'd been trying for DAYS), but the agent I spoke with helped me understand exactly how to handle the delivery app commission situation for sales tax purposes. In my state, the delivery apps are actually supposed to be collecting and remitting their own portion of the sales tax, which I had no idea about. This literally saved me thousands in potential penalties for incorrect filing. Still can't believe it actually worked after months of frustration trying to reach someone there myself.
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Sofia Price
A quick tip about those delivery app commissions - in many states, the tax rules changed in 2022-2023. Some now require the delivery platforms (UberEats, DoorDash, etc.) to collect and remit their own sales tax on their portion of the sale. Make sure you check your state's specific "marketplace facilitator" laws. In my state, I only have to collect/remit sales tax on the portion of the sale that actually comes to my restaurant, not the full amount including their commission. This varies by state though!
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Lara Woods
•Thanks for this info! I had no idea there were "marketplace facilitator" laws. Do you know if there's an easy way to check what my state requires? I've been collecting and remitting sales tax on the full amount (including their commission) which sounds like it might be wrong.
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Sofia Price
•The easiest way to check is to google your state name plus "marketplace facilitator sales tax law" - most states have published guidance specifically for restaurants dealing with delivery apps. In most states that have these laws, the delivery apps should be giving you reports that show what portion of sales tax they collected vs what you need to collect. If you've been remitting tax on the full amount including their commission, you might actually be overpaying! You might want to look into filing an amended return to get that money back. Some of my restaurant clients have received significant refunds after realizing this mistake.
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Alice Coleman
Don't forget about tax-exempt sales! Many new restaurant owners mess this up. If you sell to tax-exempt organizations (like schools, government offices, or certain non-profits), you need to keep their exemption certificates on file and track those sales separately. Also, some states have different tax rates for dine-in vs. takeout food. And alcohol often has its own separate tax rate too. Make sure your POS system is set up to track all these different categories correctly.
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Owen Jenkins
•On the tax-exempt topic - be super careful with catering orders for churches and non-profits. I learned the hard way that in my state, they need to provide their exemption certificate BEFORE the sale, not after. Had to eat the tax cost on a $2000 order because they gave me their certificate a week later!
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