Few industries have been as negatively impacted by the COVID pandemic as bars and restaurants. Since early this year, bars, restaurants, and other alcohol-selling establishments have drastically changed the way in which they do business. While they have historically been banned from selling drinks to-go, recent stopgap measures have allowed them to start selling drinks to-go in about three dozen states. Business owners rightfully jumped on this opportunity to generate additional revenue, but they may be unaware of the state tax refund opportunities it has created.
Unknown by most, many states have a different tax rate for on vs off-premises drink sales. For example, in Arkansas, the tax applies at 14% if you dine in, but only 3% if you take your order to go. In Tennessee, the tax is passed on to the customer but can be 15% if the customer dines in, but 0% if they take out.
Often, the business owner must directly pay the tax on alcohol sales. However, Texas’s mixed beverage sales tax of 6.75% only applies if the patron drinks on-premises. Likewise, Oklahoma has a 13.5% rate on mixed drinks that are consumed on site.
Traditionally, bars, restaurants, and other alcohol-selling establishments could only sell drinks for consumption on premises by law, so the tax variances didn’t matter. However, during COVID, new laws intended to provide some relief for businesses forced to close may have also created sales tax refund opportunities. If restaurant and bar owners paid the higher tax rates intended for drinks consumed on-premises for their to-go sales, it is likely they have over-paid their taxes and may be due to a refund.
During these difficult times, businesses have been incredibly creative in generating revenue to stay open. If you are a bar or restaurant owner, it is likely worthwhile to review your state’s rules on the taxation of alcoholic drinks. You or your client may be due a refund and it is a good idea to have a sales tax lawyer, CPA, or professional, such as Sales Tax Helper look into whether your business is due a sales tax refund.