What's the correct class life for a Point Of Sale (POS) System for a restaurant?

POS systems for restaurants typically fall under 5-year property for MACRS depreciation. While IRS Pub 946 Table B-2 does exclude POS systems from the Information Systems category (00.12), they generally fall under "Information and Communication Equipment" which is 5-year property. The key is to look at the asset's function rather than just its name. Restaurant POS systems are primarily computer equipment that process transactions and information, so they align with 5-year property classification despite the specific exclusion from 00.12. For franchised restaurants specifically, I've consistently used 5-year property for POS systems and haven't encountered any issues during reviews or audits.

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Just to add another data point - I've been preparing returns for several franchise restaurant owners for about 15 years, and we've consistently used 5-year property for POS systems. The way I look at it, these systems are essentially specialized computer equipment, which falls under 5-year property. While Pub 946 does specifically exclude POS systems from the Information Systems category, in practice they're treated as computer-based equipment for depreciation purposes. I've never had an issue with this classification in any IRS review or audit.

Something that hasn't been mentioned yet - don't forget to consider Section 179 expensing or bonus depreciation for these POS systems! Assuming your client has enough income, you might be able to write off the entire cost in year 1 anyway, making the 5 vs 7 year question less important for current tax savings. Just make sure to document your reasoning for the classification you choose in case it becomes relevant later on. I typically include a brief memo in the tax file explaining the rationale behind asset classifications that aren't explicitly covered in the IRS publications.

As someone who's dealt with this exact scenario multiple times, I can confirm that restaurant POS systems are definitely 5-year property. The confusion comes from that specific exclusion in Pub 946, but the key is understanding that they're still computer-based equipment at their core. One thing I'd add that hasn't been mentioned - make sure you're also considering any installation costs, training, and initial setup fees. These should typically be capitalized along with the equipment cost rather than expensed separately. I've seen preparers miss this and it can add up to a significant amount, especially for multi-location franchise operations. Also, if your client is planning to expand to additional locations, it might be worth having a conversation about establishing a consistent capitalization policy now. This will make future POS installations much cleaner from a tax perspective.