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CAKE | Restaurant Management System & POS

Information on Taxes

We provide some basic tax related information for you here.

Here, you'll find a basic guide on how taxes are applied in certain situations. To ensure you're following all tax regulatory laws for your location's, you should consult the tax laws and/or your accountant or tax professional. 

CAKE provides tax calculation as a convenience on the POS but it is the restaurant operator's sole responsibility to verify this calculation is correct and compliant for the kind of business the operator is running, jurisdiction-specific tax laws, and how it wants to compute and report tax.

Tax Information:

1) Tax is assessed on the individual item level, regardless of the quantity in a line item. 

  • A $10.00 item at 7.75% tax rate will be $10.78 after tax
  • 100 x $10.00 items at 7.75% tax rate will be $1078.00 after tax

The CAKE POS calculates individual item tax in the above method. However, some states have item quantity rules.

 

2) Tax amounts are rounded up to the nearest whole cent.

  • A $1.00 item at 7.25% tax rate will be $1.08 after tax

NOTE: That is a common practice.  However, at least two states have a bracket tax, Florida and Maryland.

Florida - http://dor.myflorida.com/Forms_library/current/gt800013.pdf  see Bracket System section.

Maryland - http://taxes.marylandtaxes.com/Resource_Library/Tax_Publications/Tax_Tips/Business_Tax_Tips/bustip8.pdf

 

3) Different tax types (and rates) can apply to different items.

  • A restaurant applies a tax of 10% to all items (“Standard Tax”) and an additional 5% tax to alcohol items only (“Beverage Tax”)
  • A check with a $10.00 food item and a $50.00 alcohol item 
  • The $10.00 food item is taxed at 10%, or $1.00
  • The $50.00 alcohol item is taxed at 15%, or $7.50
  • Check:
    • Subtotal = $60.00
    • Standard Tax =  $6.00
    • Beverage Tax = $2.50
    • Total = $68.50

Review your tax setup in Menu Admin to check to see how you've setup your taxes or tax groups. 

 

4) Taxable item sales in reporting is a sum of the taxable item sales on each order during the reporting period.

  • Taxable item sales is reported by tax type applied
  • For Example:
    • Standard Tax “Taxable Item Sales" = $60.00 (both items)
    • Beverage Tax “Taxable Item Sales” = $50.00 
  • Tax collected will not usually be an exact multiple of Taxable Item Sales * tax rate 

When filing and remitting taxes to the taxing authority, tax is detailed by type of tax collected, general sales tax, alcohol excise, rental tax, etc.  Each taxing authority has its own filing format and requirements.

 

5) The taxable amount of the item is reduced by any item-level discount.

  • A $10.00 item with a 50% discount, taxed at 7.75% will be $5.39 after tax 
    • Taxable Item Sales = $5.00

Discounting is merely a pricing mechanism, and a merchant offered discount typically reduces the pre-tax base of the item being sold. 

The exception is 3rd party coupons/manufacturers coupons.  In a 3rd party coupon scenario, the merchant is honoring another parties discount, and is typically reimbursed by the 3rd party.  In many states, the reduction in price is typically applied after sales tax is calculated on the full (pre-coupon) amount of the item.

 

6) The taxable amount of each individual item should be reduced by any check-level discounts.

  • In our example, if a 20% check-level discount is applied:
    • Standard Tax “Taxable Item Sales” = $48.00 (both items, discounted at 20%)
    • Beverage Tax “Taxable Item Sales” = $40.00 (alcohol item, discounted at 20%)
  • Check:  
    • Food Item $10.00
    • Alcohol Item $50.00
    • 20% Discount = $12.00
    • Subtotal = $48.00
    • Standard Tax = $4.80
    • Beverage Tax = $2.00
    • Total = $54.80

If a check-level (or order-level) discount is offered by the merchant.  This discount is typically pro-rated back to the items reducing the pre-tax amount of those items.

 

7)  Voided items are treated like they were never added, for the purpose of reporting sales and taxes collected (Items can only be voided until close cash is performed)

 

8) Refunded orders are deducted from taxable item sales in the same allocations in which they were originally sold.

  • This deduction from sales should come on the day the refund was processed, not the day the original sale was made.  
    • Note that order refunds can be processed on an order for which tax reporting and remittance to the state has already been done; this way the refunded amount will be deducted from taxable sales and taxes owed in the current period.
  • If we refunded our example:
    • Standard Tax “Taxable Item Sales" = -$60.00 (both items) — note this is a negative amount 
      • Standard Tax “Tax Collected” = -$6.00 — note this is a negative amount 
    • Beverage Tax “Taxable Item Sales” = -$50.00 – note this is a negative amount 
      • Beverage Tax “Tax Collected” = -$2.50 — note this is a negative amount 

**Please ensure you review your tax laws for your location to be in compliance with those laws. CAKE is not responsible for Tax calculation or collection.