Legal02/15/2026
Taxes & Accounting for F&B Businesses
What you absolutely must know — no accounting degree required
15.3% Self-Employment TaxProfit >$50K Consider S-Corp When$200-$500/month Bookkeeper / CPAVaries by state Sales Tax
Taxes and accounting sound intimidating, but for small F&B businesses, the basics are manageable. Most single-location restaurants operate as LLCs with pass-through taxation — profits flow to your personal return. The key is keeping clean records from day one: separate business bank account, daily sales tracking, and organized receipts. A good bookkeeper or CPA will save you far more than they cost.
Restaurant Tax Obligations Breakdown
Federal Income Tax10-37% (marginal)Pass-through income from LLC/S-Corp reported on personal return. Most restaurant owners fall in the 22-24% bracket.
Self-Employment Tax (FICA)15.3% of net profitSocial Security (12.4%) + Medicare (2.9%). If S-Corp: only on salary portion, not distributions.
State Income Tax0-13% (varies by state)No state income tax in: TX, FL, NV, WA, WY, SD, AK, TN, NH. California is highest at 13.3%.
Sales Tax0-10%+ (varies)Collected from customers on food sales (some states exempt groceries but tax prepared food). You remit monthly or quarterly to the state.
Payroll Taxes (employer portion)7.65% + FUTA + stateFICA 7.65% (Social Security 6.2% + Medicare 1.45%) + FUTA 0.6% + state unemployment (varies, typically 1-5%).
Tip Reporting / FICA Tip CreditRequiredEmployers must report allocated tips and pay FICA on reported tips. FICA Tip Credit (Section 45B) offsets some of this cost.
Accounting Essentials for Restaurants
Every day
Daily Sales Reconciliation
Reconcile POS reports with bank deposits. Track by payment type (card, cash, delivery apps). Takes 10 minutes at closing.
Every week
Weekly Expense Review
Categorize all purchases — food cost, labor, rent, utilities, supplies. Keep every receipt. Use accounting software (QuickBooks, Xero).
Every month
Monthly P&L Statement
Revenue minus COGS minus expenses = net profit (or loss). Compare to budget and prior months. Spot problems before they snowball.
$200-$500/month
Bookkeeper / CPA
Handles tax filings, payroll tax compliance, and financial statements. Essential for any restaurant with employees.
Sales Tax Compliance
- >Most states tax prepared food and beverages — you must collect and remit sales tax. Rates vary from 0% (Oregon, Montana) to 10%+ (some cities in Tennessee, Louisiana).
- >Register for a sales tax permit with your state's Department of Revenue before opening — operating without one is illegal and carries penalties.
- >Filing frequency depends on your sales volume: monthly (most restaurants), quarterly (smaller operations), or annually (very small).
- >Delivery app sales: You may still be responsible for sales tax even when selling through DoorDash/Uber Eats. Marketplace facilitator laws vary by state — check your state's rules.
- >Keep detailed records of all sales tax collected and remitted for at least 4 years (IRS audit window). Your POS system should track this automatically.
Common Tax & Accounting Mistakes
Not paying payroll taxes (the "Trust Fund" penalty)
Unpaid payroll taxes are the IRS's top enforcement priority. The Trust Fund Recovery Penalty holds owners PERSONALLY liable — even through an LLC. 100% of unpaid employee withholding + penalties + interest. This can bankrupt you.
Mixing personal and business bank accounts
Makes it impossible to track real profit. Also "pierces the corporate veil" — meaning your LLC liability protection can be voided. Open a separate business account from day one.
Not tracking cash income
The IRS compares reported income to industry benchmarks. A restaurant reporting unusually low sales relative to food purchases triggers an audit. Report ALL income — cash, card, delivery apps. Under-reporting is tax fraud.
Missing quarterly estimated tax payments
Self-employed owners must pay estimated taxes quarterly (April 15, June 15, Sept 15, Jan 15). Underpayment penalty is ~8%/year. Set calendar reminders and auto-pay.
Common Restaurant Tax Deductions
Cost of Goods Sold (food & beverage)Fully deductibleYour largest deduction. Track every food and beverage purchase meticulously. Target: 28-35% of revenue.
Employee wages & benefitsFully deductibleWages, health insurance, retirement contributions, workers' comp insurance. Your second-largest expense.
Rent & occupancy costsFully deductibleRent, CAM charges, property tax (if applicable), utilities. Typically 6-10% of revenue.
Equipment depreciation (Section 179)Up to $1.16M/yearOvens, refrigerators, POS systems, furniture — can be fully deducted in the year of purchase under Section 179.
Startup costsUp to $5,000 immediatelyFirst $5,000 deductible in year one; remainder amortized over 15 years. Includes market research, training, pre-opening expenses.
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