Don’t Lose Your Restaurant Because of Unpaid Taxes: Three Things You Need to Know

A recent article in the Albany Times Union noted the high number of restaurants that shut down every year for nonpayment of sales or withholding taxes. Based on an analysis of media coverage, restaurants seem to be seized more often than other types of businesses. This may be, in part, a result of the unique challenges of operating a restaurant. Many restaurateurs fall behind on their taxes due to the constant cash flow issues and low profit margins characteristic of the industry. However, if they fail to address their tax issues promptly, restaurant owners risk losing their businesses.

Here are a few key points restaurant owners must know:

Food and food products are subject to complex tax rules.

Generally, food and food products are exempt from sales tax under New York law (NY Tax Law §1115). However, the sales of food and food products prepared by restaurants and similar establishments are subject to sales tax in certain circumstances. In addition, issues can arise when restaurants…