Sales Tax Essentials [Restaurants]
Restaurants, bars, and other businesses selling prepared food and beverages are primarily focused on serving their customers delicious meals and satisfying beverages. Staying abreast of the current sales tax laws affecting businesses in this industry may often be overlooked. While it is generally understood by restaurants and bars that sales tax must be collected on their sales of prepared food and beverages, including sales of alcoholic beverages, the sales tax rules for some of their incidental charges or promotions may not be as thoroughly understood. Additional information on these and other sales tax topics is available on the Nebraska Department of Revenue’s website, revenue.nebraska.gov.
You can also contact Department of Revenue Training Specialists Margaret Akin, 308-633-2234 or Steve Drzaic, 402-595-2078 for additional tax implementation information.
Complimentary Meals & Beverages
Restaurants and bars providing alcoholic beverages or wine at no charge (during Happy Hour) must calculate and remit use tax on the restaurant’s or bar’s cost of the alcohol or wine served. If the restaurant or bar also provides snacks or food to customers for no charge, use tax is not due on the restaurant’s or bar’s cost of the food items and nonalcoholic beverages used in this manner.
Hotels that include a free breakfast with the purchase of overnight lodging are required to collect sales and lodging tax on the total amount charged for the lodging. There is no use tax due for the cost of the free breakfast for hotel customers.
Discounts & Coupons
Restaurants and bars offering coupons, discounts, or frequent-buyer cards for discounts on prepared food or beverages can deduct the amount of the coupon or discount from the selling price of these items and collect sales tax on the net amount.
Daily Deal Certificates
Sales of promotional “deal-of-the-day” certificates by advertisers, marketing companies, radio stations, or newspapers are sales tax exempt. When the certificate is redeemed, the restaurant or bar must collect sales tax on the total amount of the sale before deducting the value of the promotional deal.
Sales of gift cards or gift certificates are not subject to sales tax. When the cards or certificates are redeemed, the restaurant or bar must compute sales tax on the total amount of the sale before deducting the value of the card or certificate.
Whether or not a restaurant or bar chooses to itemize the occupation tax it pays on its customer’s invoice or receipt, the occupation tax is part of the selling price of the prepared food or beverages and is subject to sales tax.
Tips & Gratuities
Discretionary tips or gratuities given to the server by customers are not subject to sales tax whether charged to the customer’s bill or given directly to the server. Mandatory tips or gratuities which are added to the customer’s bill by the restaurant or bar are taxable.