After increasing audits of restaurants, and especially quick-service restaurants (QSRs), the Department of Taxation has provided guidance concerning sales tax collection for food consumed on premises. Info. Release ST 2012-01 (Revised Aug. 2014). Significantly, the Department has now clarified that restaurants are not responsible to collect tax where the customer states the order is “to-go” but eats in. Based on our experience, the Department had threatened during audits to assess sales tax on such transactions if the restaurant did not enter into a sample / test check agreement – an obviously unfair position. The taxpayer may have the ability to challenge the validly of a previously agreed to test check if such a threat was made to induce the taxpayer into entering the agreement (in addition to other arguments t void the agreement).

Additionally, the Information Release states that QSRs cannot simply collect tax on all sales due to the Ohio Constitution prohibition on taxing sales of food for on premises consumption, as well as discussing when sales are consider for on premises consumption in difficult situations, such as for food courts and food trucks. Please contact us if you need help determining when your restaurant must collect sales tax or if you are under audit.