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    Restaurant Technology Articles

    Smart Tax at the Bar with Tax Plus in the Dining Room

    sales taxFor years bars have priced their drinks with sales tax included, mainly to speed up the payment process by eliminating dimes, nickels and pennies in the guest’s change. This pricing strategy also makes it easier for bartenders and cocktail servers to calculate the total for each order or round of drinks. 

    The problem is that the owner is paying the sales tax out of the drink price. The five dollar drink’s profit is five dollars less the sales tax and then less the cost of the drink.

    In the dining room most restaurants add the sales tax to the drink price so the five dollar drink is only less the cost of the drink and more profitable. This sales tax can really mount up which is why some bars are adding the sales tax to all drink sales instead of raising their sales tax included drink prices. And why not?  Retailers don’t include sales tax with their prices, it is always the sales price plus applicable sales tax.

    For bars that serve food items, here is an interesting approach to make more money on the same sales: when a food item is sold in the dining room sales tax is added and when food items are sold in the bar sales tax is added. Why not add sales tax on the drinks in the bar if there is food on the tab?  Since the guest is paying sales tax on the food portion of the tab and the bartender or cocktail server is dealing with small change anyway, why not tax the drinks also! This means the owner is now collecting the sales tax on these drinks instead of paying the sales tax out of the drink price. Big difference!

    Sounds complicated, but most Point of Sale systems today can handle this function automatically. Concepts like Smart Tax are being utilized much more as it becomes harder and harder to make a profit in the hospitality industry.

    Make sure you are taking advantage of all the features and functions of today’s restaurant POS systems to increase your profits.  For more profitable and money saving ideas download our FREE white paper “POS and a Whole Lot More“.

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