Be sure to correctly calculate sales tax - even when offering discounts on meals

Accounting , GRA Blog ,
By Nina M. Daigle, CPA at Antares Group, Inc.

Many restaurant owners offer their employees free or discounted meals as a benefit of employment, but no matter the cost to the employee, restaurant owners need to be sure they are correctly calculating their sales tax.

In the state of Georgia, the sale of food or and drinks by an employer to an employee is subject to sales tax. The sales tax is based on the total sales price charged to the employee. In other words, if an employer allows an employee to purchase a $15 meal from the menu at half price, the business owner must charge and collect sales tax on $7.50. ​
 
​However, if restaurant or food establishment provides meals to employees free of charge, the restaurant owner is responsible for paying and submitting the use tax on the food provided for free. According to state law, if the tangible property - in this case the meal- was purchased exempt from sales tax for the purposes of resale, but then it is given away for free, sales tax on the product given away is still due and must be paid to the state.

Buy-one, get-one sales, whether to employees or customers, would be treated similarly in that you charge sales tax on the actual amount collected for the BOGO deal. For example, if a customer purchases two meals under a BOGO offer and pays $7.50 (the meals cost $7.50 each, but the offer is to buy one, get one for free), the amount of sales tax collected from the customer should be on the $7.50 charged, even though the customer received meals worth $15.
Bear in mind that the amount subject to tax cannot be lower than the actual cost of the food.

It is important that with the changes and the specificity of state sales tax laws that you consult with your trusted business and tax adviser to make sure you remain in compliance.

About the author
Nina Daigle is a partner with Antares Group, Inc. Nina specializes in sales and use tax, tax compliance, business valuations, financial analysis and business consulting.

Antares Group, Inc., is a full-service accounting firm located in metro Atlanta that specializes in the quick-service restaurant industry, providing comprehensive back office outsourcing, monthly accounting, business and tax consulting, estate planning, next generation planning and IT services.