Did you know that restaurant owners are among the most high profile and common delinquent taxpayers in New York State, according to a Bloomberg BNA analysis? Sales tax rules for restaurants are complex and failure to collect and remit taxes to the state is subject to significant penalties. If you have a restaurant, here are a few recordkeeping issues you may not know:
Sales tax resale certificates needed under new law.
Under New York’s prior law, sales of restaurant-type foods were always taxable, even when it was sold for resale, although the resale purchaser could apply for a credit or refund after the fact. However, a new law passed in June 2018, expanded the use of resale exemption certificates affecting the restaurant, catering, and hospitality industries. Now sales of restaurant-type foods, including heated foods and heated beverages, can be made tax free, provided the sale is for resale – meaning the purchaser intends to resell the prepared food to its customers. However, the business must collect and maintain properly completed exemption certificates on these new resale transactions in order to substantiate why tax was not collected. A properly completed resale certificate can qualify as an “audit-proof” defense that a given transaction was exempt from taxation.