Special Notice: Restaurant Surcharges

For a PDF of this BOE notice, click here: https://www.boe.ca.gov/pdf/l491.pdf

Many restaurant owners/operators add a surcharge to their receipts to cover required employer costs, such as increases to minimum wage, healthcare contributions, and paid sick leave. If you add a separate surcharge to the customers’ bills, sales tax applies to the surcharge amount.

Whenever a surcharge is separately added to any taxable sale, the surcharge is also subject to tax (Revenue and Taxation Code section 6012). The law does not allow a specific exemption for added surcharges; therefore, you may not claim the cost of the surcharge as a deduction on your sales and use tax return.

In the example below, the computation of sales tax on a taxable sale includes a restaurant surcharge. Tax is applied to the total selling price including the surcharge. The example assumes an 8.5 percent sales tax rate, but your actual tax rate may differ:

example tax

 

For more information, please see the online Tax Guide for Restaurant Owners at http://www.boe.ca.gov/industry/restaurant.html. You may also call the Customer Service Center at 1-800-400-7115 (TTY:711) weekdays from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.

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