As a restaurant owner, one of your tax responsibilities is the correct payment of sales taxes. The purchase of food for eventual resale in your restaurant is a tax-exempt purchase. Your supplier should not charge you sales tax on food used exclusively for resale. Sales taxes will only be due when you eventually sell food to patrons at your restaurant.
A sales tax is charged on the sale of tangible personal property, rentals of personal property and the sale of services. The sales tax is calculated by multiplying the sale price by the current state sales tax rate. The sales tax rate varies from state to state across the United States. Municipalities can also charge a sales tax that will be added to your purchase price on top of the state sales tax.
Certain sales are exempt from the payment of sales taxes. Each state lists its own specific exemptions to sales taxes. Charitable and religious organizations receive an exemption from sales taxes for purchases for the organization’s use. Prescription medicine and other medical supplies are also exempt from sales taxes. Another major exemption is the purchase of goods for future resale. As long as a good is purchased for future resale without providing any current benefit to the purchaser, it will be exempt from sales taxes.
Sales Tax on Food for Resale
Purchasing food for a restaurant that is used exclusively for resale will be exempt from sales taxes at the time of purchase. Depending on your state, you may be required to present your supplier resale certificate to prove you will be purchasing the food for the sole purpose of resale. Even though the initial food ingredients will be altered by cooking before resale, states consider sales by restaurants a pure resale transaction. You will not need to pay sales taxes on food you purchase for resale.
Collecting Sales Tax on Food
When you sell food to your customers, you will be responsible for collecting sales taxes. You do not pay taxes on the purchase of food because you will be collecting taxes on the final product. It is your responsibility to correctly calculate the amount of sales taxes due by your customers. You must register your restaurant with your state and make payments of sales taxes at least quarterly. If you do not make the required sales tax payments to the state, your business will be charged a penalty based on the estimated unpaid taxes.
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