Quick story:
Dino & Murphy’s was busy, beloved, and baffled by cash that never seemed to increase in their bank account. The restaurant had plenty of traffic and food sales but couldn’t figure out why they seemed to be struggling. Their old accountant filed sales tax for delivery and pickup orders, assuming the apps “handled their own fees.” In their situation, the delivery platforms had already remitted sales tax on their portion of restaurant sales. When the restaurant-focused accountant performed proper restaurant bookkeeping, in one year, $18,000 in overpaid sales tax was found.

At the same time, payroll data and policies weren’t organized to support the federal FICA tip credit because service charges were mixed with tips, tip-out percentages fluctuated, and job codes didn’t match what people did. The tax credits for restaurants weren’t claimed on the federal return because the old accountant and owners just didn’t know about them. The restaurant-focused accountant cleaned up the POS reporting for what happened, documented tip pooling, and separated service-charge wages from tips. This allowed the restaurant to go back and claim the credit for over $55,000.

Dino & Murphy’s didn’t change their menu. They changed who handled their numbers and made $73,000 without serving a single customer. The name has been changed but this is a real story about restaurant accounting and one that is a reality for many restaurant owners.

1) Sales Tax Compliance Is an Operational Design, Not a Monthly Form

A restaurant accountant builds compliance into your daily processes which is required for restaurant sales tax compliance:

• Knowing marketplace facilitators: application-based platforms may remit tax from your taxable base for you as the restaurant. Don’t double-pay (or under-pay). This requires POS mapping (another button) and a monthly reconciliation that ties daily POS summaries to the restaurant sales tax return.
• Tips vs. service charges: Tips that are voluntary are generally not taxable for sales tax; mandatory service charges may be depending on the state. Labels, POS buttons, and receipt language must match the tax treatment. Inaccuracy in how receipts are printed can cause large issues when under a sales tax audit.
• Gift cards & deposits: When selling gift cards, you may need to record them as deferred revenue and then remit sales tax when redeemed, not sold. This is a difference from federal tax treatment for most cash basis payors.

Our Tip to Ask For: a sample sales-tax workpaper by location/category and proof that it ties to daily reports and bank deposits.

2) Proper Payroll & Operational Setup for the Tip Credit

The FICA tip credit can be real money but only if your systems tell a clean, auditable story. Imagine missing a refund of 7.65% of the tips you collected and paid payroll tax on.

• Understanding the policy first: Writing down tip pooling/tip-out rules; aligning POS job codes with payroll classes so overtime and dual-rate work calculate correctly needs to be setup properly.
• Differentiating tips vs. what is not a tip: Understanding what is and is not a tip when it comes to federal guidance on tip reporting for restaurants.
• Mixed roles and overtime: Servers who also host/run may need accurate weighted OT. Non-compliance in tip reporting calculations can void the credit and trigger wage issues.
• Documentation: Create and keep worksheets of charged/cash tips, pool distributions, and pay-stub clarity. This is what substantiates the credit at tax time and in restaurant payroll.

3) Restaurant-Standard Analysis That Drives Action (Weekly, Not Year-End)

Restaurant Specialists avoid “pretty but passive” reports. They deliver highlighted reports so that restaurants can improve their metrics and identify issues in operations.

• Prime cost discipline: Track costs and labor closely. Split food vs. beverage margins; split FOH/BOH labor and watch trend lines.
• Menu engineering: Use contribution margin and menu mix, not just food-cost %. Flag variance for portion control and waste.
• Channel/daypart profitability: Dine-in vs. delivery vs. catering; lunch vs. dinner so you schedule and market where profit lives.

Our Tip to Ask For: a one-page report showing prime cost, labor by daypart, and key variances.

4) Systems & Controls That Keep Numbers Trustworthy

Great operators win on process. Great accountants design the system.

• POS Accounting Process: Post daily entries by revenue category (food, beer, wine, liquor, retail, catering, service charges), tender types, tax buckets, and tips—all mapped to a restaurant-specific chart of accounts.
• Bank/merchant reconciliations: Tie deposits, chargebacks, and fees to daily Restaurant POS summaries. This process finds money recognized but never deposited into the restaurant bank account from the POS.
• Inventory cadence: Weekly or period counts aligned with your COGS categories. Even a lightweight system beats guesswork.
• Controls that fit reality: Blind cash drops, key-item counts (prime proteins/top-shelf liquor), void/comp approvals, and access hygiene in POS/inventory tools.

Our Tip to Ask For: a period-close checklist of what your accountant performs on a monthly basis.

5) Proactive Income Tax Strategy Built for Restaurants

Restaurant Income Tax and Restaurant Sales tax outcomes are the by-product of good books, good timing, and consistent planning.

• Cost of Goods Sold: Periodic inventory calculations and aligned categories make taxable income credible and operationally useful.
• Fixed assets: Plan restaurant equipment purchases to leverage federal tax deductions where appropriate; keep in mind the de minimis safe harbor for smallwares per policy. Also keep in mind that paying taxes today can be more efficient than deferring them.
• Entity & owner pay: Restaurant Entity Structuring affects payroll tax, distributions, and exit plans. Revisit as you grow and as your ideas expand.
• Credits & documentation: From the FICA tip credit to state incentives, specialists keep the paper trail as part of the restaurant accounting, not as an afterthought.

Bottom Line (and the Lesson from Dino & Murphy’s)

• Sales tax compliance must be engineered into POS mappings, marketplace treatment, receipts, and gift cards before a return is ever filed.
• The tip credit is earned on the floor but won through proper restaurant accounting. Clean policies, job codes, and reconciliations.
• Restaurant-grade analysis, daily integrations, and simple, durable controls turn accounting from a cost into an operational advantage.
• And if your books treat you like a generic retailer? You could be overpaying sales tax, just like Dino & Murphy’s $73,000, while missing credits you’ve already earned.

Hire a professional who speaks to your industry. Your guests will feel it, your managers will use it, and your cash will finally tell the same story your dining room does.