Are you looking to start a food truck but aren’t sure what taxes you need to pay? Or maybe you have a food truck but with the first tax bill you received you’re realizing you need a sales tax strategy. Then read on for a full guide to sales tax for food trucks!
As a food truck owner, you’re likely working either completely alone, or as part of a very small team. That means you’re taking on a lot of different roles – chef, server, business manager, marketer, lawyer, accountant. But you didn’t go into the food truck business just to be bogged down by logistics and paperwork.
This guide to sales tax for food trucks will guide you through what you need to know in order to make sales tax as simple and pain-free as possible, so you can focus on all the parts of your business that really excite you – like your menu.
Do food trucks collect sales tax?
Food trucks are legally obligated to collect, file, and pay sales tax. Most states and treat food trucks the same as restaurants when it comes to sales tax obligations.
Not sure what the sales tax rate and obligations for your state is? We’ve put together a state-by-state guide on sales tax. Make sure you’re clear on exactly what your state and city tax rates are, and how your state classifies certain goods. For example, in some states, “prepared foods” are taxed differently than “groceries”. If you sell protein bowls on your food truck and you sell bananas, those two items may be taxed differently, with the banana being considered a grocery item.
While you collect sales tax with every single purchase, you only pay sales tax a few times a year, or once a month. That means that you need to keep your sales tax money separate from your revenue. That way you know you have enough money to pay your tax bill when it’s due.
Note that you must collect sales tax with every purchase, even cash-only purchases. The IRS has some surprising ways of figuring out if you’re withholding sales tax on cash purchases, and at the end of the day you may end up losing more money with late fees and penalties if you try to withhold sales tax.
Should you add sales tax to your food truck menu prices?
As we covered above, you are responsible for collecting sales tax for every single purchase.
Some food truck owners opt for including sales tax in their pricing, to simplify pricing and cash exchange.
For example, let’s say you sell sandwiches. Before sales tax, that sandwich costs $10. If your sale’s tax is 8%, then the price of your sandwich is now $10.80. You can list the price on your menu as $10.80, and that’s exactly what the customer pays. Another option is to list your price as $10, and the customer pays $10.80 at the point of sale.
In America, customers expect to pay sales tax on top of the menu price. That being said, there may be some benefits to including sales tax in your pricing.
If you’re running a promotion like $15 lunches, or $11 sandwiches, then including sales tax in that price is can entice customers. They are truly only paying $11 for that sandwich.
Other food trucks may include sales tax in the price in order to come up with a nice, round number. This is great for high traffic and cash-heavy food trucks as it limits handling change.
If you decide to include sales tax in your food truck menu price, keep in mind that you cannot over collect on sales tax. Using the example above, if you want your $10.80 sandwich to be an even $11, you cannot maintain a $10 price and collect $1 on sales tax. If you do so, you may need to issue refunds to customers, which can be a major headache. Instead, you can play around with your base pricing such that the added sales tax equals an even number.
Calculate sales tax for every location your food truck travels
Some food trucks stay relatively stationary, or service a handful of fixed locations within a county. But if you travel across tax districts or across state lines, you may need to collect different sales tax amounts.
Most states also have local taxes, in addition to state taxes. Make a list of all the locations your food truck travels, and make sure you know the sales tax rates for each of those locations. Also keep this in mind when renting your food truck out for special events.
You can refer to our state-specific sales tax guide for useful information on different sales tax rates in every state.
Use DAVO with your Point of Sale software to automate sales tax for food trucks
Does your food truck use a Point of Sale (POS) software? A POS is the software that lets you accept payments and keep track of all of your sales. These are typically cloud-based software on some sort of touch screen monitor or handheld device.
Having a good POS system can reduce a lot of paperwork and headache for your food truck business. In addition to collecting payments, POS systems these days integrate with other apps to give businesses inventory management tools, marketing tools, and a lot more. Think of it like your digital business partner. If you haven’t yet chosen a POS for your food truck, be sure to read our guide for choosing the best POS for food trucks.
DAVO Sales Tax integrates with some of the best and most comprehensive POS systems in order to automate sales tax for you. When you use DAVO with your POS system, sales tax is automatically collected with every single purchase. DAVO sets sales tax money aside every day, so you don’t have to worry about accidentally spending your sales tax money before the tax bill is due.
When it comes time to pay your sales tax bill, DAVO will automatically file and pay your sales tax bill on time, and in full.
Best of all, when you use DAVO with a POS system, you don’t have to take any extra steps. After a 5-10 minute setup, DAVO runs automatically.
For busy food truck owners, using a solution like DAVO with a POS system can get rid of the stress and paperwork of sales tax. Check out which POS systems DAVO integrates with, and try DAVO yourself!
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