A Guide to Taxes for Restaurant Owners


They’re very few entities in the United States that are exempt from paying taxes but sadly restaurants are not part of that list. As a business owner it’s important you understand which restaurant texts you have to be when you have to pay them and how are you have to file them. additionally, you will need to know what deductions you need to make from your employees’ paychecks as well as provide them with advice and guidance on how to report their tips for this upcoming tax season.

If your restaurant provides online services such as ordering food online, restaurant merchandise, gift cards, catering, and online event ticket sales, then you will most likely benefit from hiring an e-commerce tax accounting service that can provide you with the necessary accounting solutions designed for your business. Companies like Fully Accountable can provide you with niche solutions, multi-sales channel operations, and omnichannel marketing among other things to help you scale your business. Here are some things that you can expect when managing your restaurant’s taxes.

Tax Deductions


Despite tax season being the time of the year where you will have plenty of business expenses, it’s important to recognize that you will also have many deductions that will save you a lot of money in the long run. Some of these deductions can be for things such as operating expenses, advertising, leasing or buying a car for business use, your employees’ salary and benefits, and the cost of goods sold or COGS. Additionally, you can have deductions for repairs and maintenance, charitable donations, new small business tax deductions, operating losses, COVID-19, and improvements and equipment.

Like all restaurants, yours will need to be equipped with the appropriate equipment needed to cook food, serve your clients, and store your produce, among other things. If you Google “lease restaurant equipment no credit check,” you’ll find The Restaurant Warehouse, which offers to finance restaurant equipment for low payments that even startups can afford. They work with you despite having a low credit score or being a brand new business owner.

The Restaurant Warehouse can approve financing from $1,000 up to $100,000, so you can leave your working capital for other productive uses. If you already have an established business and simply need to expand your equipment for renovation for example, then you will benefit from leasing restaurant equipment.

Income Tax by Business Type

Your restaurant’s tax return depends on your business’s legal structure. For example, sole proprietors need to file all business income taxes on their personal tax returns, while corporations, which are more regulated by the government, need to file a business tax return. Sole proprietors also need to pay estimated taxes that can range in $1,000 or more.

Additionally, partnerships do not file income tax returns with the IRS. However, they do file an information return form that reports a business partnership’s income, deductions, losses, gains, and other things. Corporations will have the same deductions as sole proprietorships, but their profit is subject to double tax—a corporation will be taxed when deductions are earned and its shareholders are taxed when the deductions are distributed as dividends.

Payroll Taxes


Your business will be subject to two types of payroll taxes—deductions from your employees’ wages and taxes that you’ll pay as an employer based on those wages. As an employer, you will need to pay social security taxes (12.4 percent), Medicare taxes (2.9 percent), and federal unemployment or FUTA taxes (six percent).

Sales Tax and Taxes on Tips

Business owners need to pay sales tax in their city and state. A sales tax is a consumption tax that’s imposed by the government on each of your sales of goods and services. According to the Fair Labor Standard Act or FLSA, employees that earn $30 of gratuity or more and receive a wage lower than the national minimum, will need to report their tips to you and as taxable income during tax season.