Restaurants
Tax, accounting, and advisory for restaurants, breweries, and hospitality operators who need to control food and labor costs and keep up with compliance.
Overview
Restaurants operate with tight margins, high transaction volume, and a large hourly workforce. Food cost, labor, and occupancy can each move results by several points, and owners need timely numbers to react. Tipped employees bring their own payroll reporting requirements, and the FICA tip credit under IRC Section 45B can be a meaningful benefit for food and beverage employers that report tips correctly. Pease Bell, a Top 200 U.S. CPA firm headquartered in Cleveland, Ohio, works with independent restaurants, multi-unit groups, breweries, and hospitality operators.
Our services include tax preparation and planning, sales tax compliance, food cost and inventory analysis, multi-unit reporting, and outsourced accounting for operators that would rather spend their time running the business. Breweries and other producers also have excise tax and production accounting needs. For franchise restaurant owners, we coordinate with our franchise practice so franchisor reporting requirements are met alongside the operator’s own tax and management reporting needs.
How We Help Restaurants
FICA Tip Credit
Calculation and documentation of the IRC Section 45B credit for employer Social Security and Medicare taxes paid on certain employee tips, along with review of tip reporting procedures that the credit depends on.
Sales Tax Compliance
Sales tax filings and taxability reviews for food, alcohol, catering, delivery, service charges, and merchandise, with reconciliation of point-of-sale reports to returns so collected and remitted amounts agree.
Food Cost and Inventory
Inventory count procedures, theoretical versus actual food cost analysis, and menu costing support that help operators see where waste, portioning, or pricing is eroding margin.
Multi-Unit Reporting
Consistent location-level financial statements and key metrics, such as prime cost and sales per labor hour, so owners can compare restaurants on equal terms and act quickly on problems.
Outsourced Accounting
Bookkeeping, payroll reconciliation, vendor payments, and monthly financial statements for restaurant groups and independent operators that need accurate, timely books without hiring a full internal accounting department.
Tax Planning and Structure
Income tax planning, entity structure for new locations, depreciation and cost segregation analysis for build-outs and remodels, and coordination of related operating and real estate entities.
Challenges We Help Restaurants Address
- ✓Unclaimed FICA tip credits caused by incomplete tip reporting
- ✓Food costs drifting above target without clear explanation
- ✓Sales tax errors on delivery, catering, alcohol, and service charges
- ✓Inconsistent reporting that makes multi-unit comparisons unreliable
- ✓Owners spending nights on bookkeeping instead of operations
Featured Insights
Frequently Asked Questions
What is the FICA tip credit?
The FICA tip credit under IRC Section 45B lets employers in food and beverage businesses claim a federal income tax credit for a portion of the employer Social Security and Medicare taxes paid on employee tips. The credit generally applies to tips above the amount needed to satisfy federal minimum wage requirements. Accurate tip reporting by employees is essential to claiming it.
How do I calculate restaurant food cost?
Food cost percentage is generally calculated as beginning inventory plus purchases minus ending inventory, divided by food sales for the same period. Comparing that actual figure to a theoretical food cost, based on recipes and sales mix, helps identify waste, theft, portioning issues, or menu pricing that needs adjustment. Consistent inventory counts are the foundation.
Are service charges taxed differently from tips?
Often, yes. Mandatory service charges added by the restaurant are generally treated as the restaurant’s revenue and, when distributed to staff, as wages rather than tips for payroll purposes. They may also be subject to sales tax in many states. Voluntary tips left by customers are treated differently, so the distinction affects payroll, sales tax, and the tip credit.
Should a restaurant outsource its accounting?
Many independent and multi-unit operators do. Outsourcing bookkeeping, payroll reconciliation, and monthly reporting gives owners access to experienced accountants without the cost of a full internal team, and can produce more timely, consistent financial statements. It works best when point-of-sale, payroll, and vendor systems are connected and reconciled monthly.
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