In the ever-evolving landscape of restaurant technology, Toast has emerged as a leading point-of-sale (POS) system, offering comprehensive solutions for various aspects of restaurant management. One crucial area where Toast shines is in its handling of sales tax on delivery services. As more restaurants embrace delivery options, understanding how Toast manages this complex aspect of taxation is essential for business owners. Let’s dive into the details.
Automatic sales tax calculation in Toast
Toast POS offers a built-in feature that helps businesses apply the correct sales tax to each transaction, including delivery orders. That said, the system doesn’t automatically determine the correct tax rates for you. As a business owner, you must first calculate the appropriate sales tax rates, including both state and local taxes, depending on where your sales take place. This step is essential because sales tax rates can vary significantly based on location. Mistakes in this area can lead to overcharging or undercharging customers and potential compliance issues.
In Toast, you can manually input these tax rates, ensuring they apply to each sale, whether in-house or delivery. If your business operates in multiple locations, this might mean setting up different tax rates for each area to comply with varying local tax regulations. It’s important to regularly review and update these rates, as tax laws change frequently.
Collecting and setting aside sales tax
Once the correct sales tax rates are set up in Toast, the system will automatically add the tax to every transaction, including delivery services. However, collecting that sales tax is only part of the responsibility. You also have to manage these funds appropriately, which involves setting aside the collected sales tax in a separate account to ensure it’s available when tax payments are due.
Failing to set aside sales tax money can lead to a misleading view of cash flow. The collected tax funds may mistakenly appear as available revenue, leading to the unintentional spending of money that should be reserved for tax payments. This situation can cause financial strain when it comes time to file and pay the taxes, potentially resulting in penalties for late or insufficient payments.
Filing and paying sales tax on delivery services
The process doesn’t end with collecting and setting aside sales tax. Businesses are also responsible for filing and paying the correct amount to state and local tax authorities. Depending on the jurisdiction, this could be a monthly or quarterly requirement. Fortunately, Toast manages multiple tax jurisdictions seamlessly. The system:
- Recognizes different tax rates based on delivery locations
- Applies the correct tax rate for each specific order
- Adjusts for any local or special district taxes that may apply
This feature is particularly valuable for businesses operating in areas with complex tax structures or those delivering to a wide geographic area.
Automating sales tax with DAVO and Toast
The complexity of sales tax can increase for businesses offering delivery services, especially when dealing with different tax rates across multiple locations. The good news is you can integrate Toast with a solution like DAVO to automate sales tax collection, filing, and payment. This reduces the administrative burden and helps ensure compliance with all applicable tax laws.
DAVO automates every aspect of sales tax management, including:
- Automatic collection: DAVO works with Toast to collect the correct amount of sales tax on each delivery transaction based on the rates you have set up.
- Setting aside funds: It sets aside the collected sales tax daily into a secure account, ensuring that these funds are not accidentally spent or mingled with operational revenue.
- Automated filing and payment: When it’s time to file and pay sales tax, DAVO automatically files the sales tax return and remits the payment in full and on time, taking the guesswork out of the process.
Toast provides a robust system for handling sales tax on delivery services, but integrating with DAVO Sales Tax truly helps you stay compliant, avoid penalties, and focus on growing your business instead of worrying about sales tax. Contact us today to learn how you can connect Toast to DAVO and never worry about sales tax on delivery services again.
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