A Guide to Restaurant Taxes
Taxes are a necessary evil for any business, but they are essential for restaurants. In the United States, these establishments are subject to several federal, state, and local taxes. Fortunately, however, many of the expenses associated with running a restaurant are deductible. These expenses can include supplies, repairs, inventory, repairs, and many others. The following guide will provide a brief overview of some of the most common taxes that restaurants must pay, along with how tax write-offs work.
Common Tax Write-offs for Restaurants
In addition to the deductions previously listed, several others can be written off for a tax break. One example is equipment. Most equipment you buy to improve your restaurant can be deducted. This could include ovens, refrigerators, ice machines, and other appliances. A good way to figure out precisely what is considered deductible in this category would be to search for “restaurant equipment San Francisco.”
Restaurant supply stores make it easy to see what restaurant supplies are available and considered necessary for commercial kitchens. That doesn't necessarily mean that certain other small appliances and kitchen supplies are not deductible. If they are used in your business, then they are likely eligible for a write-off. Other common write-offs are payroll, operating, driving, advertising, and donations, to name a few.
Why You Should Hire a Professional to Do Your Restaurant Taxes
Because of the many complexities of small business taxes, it's always recommended that you hire a professional to complete your return. A CPA is the best resource for getting them done correctly and any avoiding penalties or extra expenses. CPAs will usually give you tax envelopes that include copies of your tax return and any original paperwork you gave them. It's essential to provide them with every receipt you have, including charitable deductions and restaurant equipment, no matter how small or large the expense.
You don't have to worry about divulging sensitive information to your CPA, as they are professionally obligated to keep it secure. This is why they only use particular office supplies, such as custom tax return envelopes and tax folders to organize and conceal your information.
Gross Receipts, Net Income, and Cost of Goods Sold
One of the most important things to know is your gross receipts because it determines the taxes you need to pay. A restaurant's gross receipts include all receipts from any food or beverages sales. They also include income from vending machines and other sources such as parking fees or admission charges for live entertainment.
The restaurant's net income is the gross receipts minus the cost of goods sold (COGS). Cost of goods sold includes all expenses related to producing food and beverage products, such as ingredients, supplies, utilities, labor costs for employees who work in production areas, rent for production areas not otherwise deducted from gross receipts or included in other deductions from gross receipts (such as depreciation), and utilities for production areas not
Figuring out Property Taxes
Property tax is a tax that is levied on the property's value. If you are leasing your property, you may not be liable for these taxes, but you'll need a well-written contract stating the agreement's specifics. However, if you own the property, it is usually calculated as a percentage of the property's assessed value and can vary depending on the jurisdiction. The assessed value is generally determined by taking into account the size, age, and location of the property. A restaurant can be subject to property taxes if it has a physical location like a building or land. If it doesn’t have a physical location, then it isn’t subject to property taxes.
