Tax & Accounting
Built for Your Restaurant

Running a restaurant comes with razor-thin margins. The good news is that the IRS allows restaurant businesses to deduct a wide range of ordinary and necessary business expenses. Most owners miss several of these — and end up overpaying.

1. Cost of Goods Sold (COGS)

All food and beverage costs that go into the products you sell are fully deductible. This is usually your largest deduction. Keep every invoice from your suppliers.

2. Labor Costs

Wages, salaries, employer payroll taxes (FICA, FUTA), and employee benefits are all deductible. This includes back-of-house staff, servers, managers, and part-time workers.

3. Rent and Occupancy

Monthly rent, common area maintenance (CAM) charges, and property insurance for your restaurant location are fully deductible operating expenses.

4. Equipment and Depreciation

Large equipment purchases (ovens, refrigerators, POS systems) can be deducted over time via depreciation — or expensed immediately using Section 179 or bonus depreciation.

5. Delivery Platform Commissions

Fees charged by DoorDash, Uber Eats, and Grubhub (typically 15–30% per order) are fully deductible as a business expense. Make sure these are recorded properly in your books.

6. Utilities

Electricity, gas, water, internet, and phone services used for your restaurant are deductible. Keep utility bills organized by month.

7. Marketing and Advertising

Social media ads, Google Ads, printing costs for menus and flyers, website costs, and any promotional expenses are all deductible.

8. Professional Services

Accounting fees, tax preparation fees, legal fees, and consulting costs are fully deductible. This includes what you pay Restaurants Tax Pro!

9. Business Insurance

General liability, workers' compensation, liquor liability, and commercial property insurance premiums are all deductible.

10. Business Meals & Entertainment

Meals with clients, vendors, or business partners are 50% deductible. Keep a log of who you met with and the business purpose of each meal.

Bottom line: Proper bookkeeping is what makes all of these deductions claimable. If your books are messy, deductions get missed. That's why year-round bookkeeping with QuickBooks pays for itself every tax season.

If you use third-party delivery platforms, you've probably noticed that the amounts deposited into your bank account don't match your gross sales. That's because the platforms deduct their commissions, fees, and sometimes taxes before sending you money. Here's how to reconcile this correctly.

Why Delivery Platform Reconciliation Matters

If you record only the net deposit (what hits your bank), you're understating your revenue. This causes problems with your books and can even trigger IRS scrutiny. The correct approach is to record gross sales and then expense the platform commissions separately.

Step-by-Step Reconciliation

• Download your payout report from each platform monthly (DoorDash Merchant Portal, Uber Eats Manager, Grubhub for Restaurants).
• Identify gross sales — this is the total customer order value before any deductions.
• Identify platform fees and commissions — typically listed as "service fee," "delivery fee," or "commission."
• Record gross sales as revenue in QuickBooks or Xero.
• Record the commission as an expense (use an account like "Delivery Platform Fees" or "Merchant Fees").
• The net deposit matches your bank statement — reconciliation complete.

Common Mistakes to Avoid

• Recording only the net payout as revenue
• Forgetting that some platforms charge weekly vs. bi-weekly
• Missing the "adjustments" line which can include refunds and chargebacks
• Not separating sales tax collected by the platform from your own sales tax obligations

This process takes 30–60 minutes per platform per month if done manually. With proper QuickBooks setup and bank rules, it can be automated. That's part of what we do for our bookkeeping clients at Restaurants Tax Pro.

Sales tax is one of the most confusing areas of restaurant compliance — and getting it wrong is expensive. Here's what restaurant owners need to understand about multi-state sales tax obligations.

Does Your Restaurant Have Nexus?

Nexus means your business has a sufficient connection to a state to be required to collect and remit sales tax there. For restaurants, nexus is typically established by having a physical location in a state. But it can also be triggered by:

• Catering events in another state
• Selling merchandise, gift cards, or packaged goods online and shipping to customers in other states
• Having employees or contractors working in another state

Food Is Not Always Taxable

Sales tax rules on food vary dramatically by state. In some states, prepared food (hot food sold ready to eat) is taxable while grocery items are not. In others, all food sales are taxable. In a few states, there's no sales tax at all. You need to know the rules for each state where you have nexus.

Delivery Platforms and Sales Tax

Many states have made delivery platforms like DoorDash and Uber Eats "marketplace facilitators" — meaning they collect and remit sales tax on your behalf for orders placed through their platform. However, this doesn't eliminate your own sales tax obligations for dine-in or direct online orders.

Penalties for Non-Compliance

Missing sales tax filings can result in penalties of 5–25% of the tax due, plus interest. States can audit up to 3–4 years of back records. The sooner you get compliant, the better.

If you're unsure whether your restaurant has multi-state obligations, contact us for a free review. We handle sales tax registration and filing for restaurants across 18+ states.