Restaurant Sales Tax Audits – What to Watch For – Tip #3

What do restaurant owners need to know about sales tax on equipment purchases?

The Minnesota Department of Revenue has dramatically increased the number of Sales and Use Tax audits in recent years and that means more sales tax audits for restaurants.  The audits are getting more sophisticated and focused on a few key areas that can really trip up business owners.  In the next three blogs I will cover the top three areas where restaurants have found themselves on the wrong side of a sales and use tax assessment.

While this blog could technically fall under the category of Use Tax discussed in Part 1 of this series, I thought it deserved its own discussion.

#3 – Restaurant Equipment Purchases

Sales tax auditors do a 100% detailed audit of the entire restaurant’s fixed asset schedule.  They want to see receipts for all of your ovens, ranges, walk-ins, fryers, POS stations and the like.  If you bought one of those items out-of-state or even if it was as simple as buying it in Dakota County and bringing it to Hennepin County, you’re supposed to notice that you weren’t charged the correct rate and then self-assess yourself.  Sounds like a full time job just tracking sales tax!

One quick tip that sales tax auditors use for spotting items that are missing sales tax is to start with ANY items that end in .00 or .99.  There is a great chance that no sales tax was charged and there might be a use tax liability.

If you have any questions on restaurant accounting or audits,  please contact Nick Swedberg, CPA at: nswedberg@myboyum.com.