Restaurant Industry Guidance

Eating establishment is defined as a business, or an identifiable location within a business, which advertises or holds itself out to the public as being engaged in the sale of prepared or ready-to-eat food or beverages, to customers for their immediate consumption on or off the premises. If your business meets this definition, you should collect Pennsylvania taxes.

An eating establishment includes, but is not limited to the following:

IMPORTANT: An eating establishment may be mobile or immobile and may or may not provide seating accommodations for its customers.

In general, the sale of food and non-alcoholic beverages by a caterer or eating establishment in Pennsylvania is subject to tax regardless of whether the customer is dining in or taking out. Any entity that sells food or other taxable items in PA, must register for and display a valid Sales Tax License. For more information on sales tax licensing, visit the sales tax page.

To find out more about the taxability or the best way to handle situations specific to your industry, please refer to these Frequently Asked Questions on the online Customer Service Center. Topics for the FAQs include:

• Advertising Prices
• Alcoholic and Non-Alcoholic Beverages
• Cold Food
• Complimentary Food and Beverages
• Cover Charges and Ticket Sales
• Discount Coupons
• Food Deliveries
• Food Sold for Consumption at Your Place of Business
• Food Sold To-Go
• Hot Prepared Food
• Online Ordering Service
• Surcharges
• Tips

The following items are outlined in the law as tax exempt and therefore would not be subject to sales tax:

• Alcoholic Beverages - with the exception of PLCB licenses that include a Wine Expanded Permit. Wine Expanded Permit holders must charge sales tax on the sale of wine for off-premises consumption such as to-go orders.
• Bottled Water - as long as it contains no flavoring
• Candy & Gum - including hard candy, caramel, chocolate candy, licorice, fudge, cotton candy, caramel coated popcorn, chocolate coated granola bars and similar items.
• Gift Cards - gift cards are not subject to sales tax, but tax is due on the ready to eat food or beverages purchased with a gift card.
• Gratuities (tips) - not taxable when separately stated on the customer's receipt, guest check, or sales invoice
• Wearing apparel - t-shirts, hats, jackets, etc.

NOTE: Food and beverages billed to and paid for by a registered charitable organization that has a valid sales tax exemption number are also exempt from tax. These entities must provide an exemption certificate upon purchase that includes their "75" number. Food and beverages billed to and paid for by individuals on behalf of exempt organization are not entitled to the exemption. To find out more about exemption certificates, please see the Application for Sales Tax Exemption.

For tax purposes, one of the most important jobs of an eating establishment is to keep good records. These businesses must maintain records for review by the Department of Revenue in accordance with Regulation 34.2 Keeping of Records. This regulation spells out that records must show the amount of tax separate from the total sales and that records must be maintained for each store or other outlet. It is required that these records (hardcopy or electronic format) be kept for the current year and the three previous calendar years.

Keeping detailed records of your business operation will help you prepare accurate and complete sales tax returns. Detailed records will also serve as documentation of the accuracy of your returns if you are audited.

To find out more about why type of records to keep, visit our Online Customer Service Center or watch our video Revenue411 - Recordkeeping in the Restaurant Industry.

If you employ one or more persons, your business needs to register for an Employer Withholding Account (Section 9 of the PA-100). Pennsylvania law requires employers to withhold and remit PA personal income tax from employees' compensation in two common cases:

• When resident employees perform services within or outside PA; and
• When nonresident employees (other than residents of New Jersey, Maryland, Virginia, West Virginia, Ohio and Indiana from whose wages you withhold at the reciprocal state's tax rate) perform services within PA.

An employer is any individual, partnership, association, corporation, government body or other entity that employs one or more persons and is required under the Internal Revenue Code to withhold federal income tax from wages paid to an employee. For more information, visit the Employer Withholding Tax page.

There are four principal kinds of business structures: sole proprietorships, partnerships (general or limited), limited liability companies and corporations (S corporation or C corporation). Regardless of your business structure, every business has an income tax filing requirement in one form or another. How you report this income and how it is taxed can be different depending on the type of business structure you choose. For more information, visit the business section of our website.