Understanding the Risks for Hookah Lounge Owners in Georgia
If you are an owner of a Hookah Lounge in the Metro-Atlanta Georgia area, then you might be on the hook for a little bit more than just tobacco tax.
Tobacco tax is just the tip of the audit. The auditors will likely ask you for proof of payment of the tobacco tax that you paid when you purchased the tobacco used for your pipes.
Important:
If you did not pay the tax on your tobacco, the most likely result is a forfeiture of all your tobacco products. Then, the auditors will likely send you over to the Criminal Investigations Division.
What Happens If You Paid the Tobacco Tax?
If you have paid your tobacco tax, the auditors will ask you for all of your other books and records showing all of your transactions.
- The gross sales will need to match the monthly sales tax returns.
- If you charge a mandatory gratuity fee, then those mandatory gratuities associated with a taxable sale are subject to sales tax.
- Voluntary gratuities are not taxable.
It’s a dicey area of law, but Georgia taxes admissions and charges for participation in games and amusement activities. Therefore, we can deduce that admissions can equate to cover charges and door-fees collected by the business as well.
What Records Will You Need to Provide?
You will need to produce sales tax proof of payment for all consumables, such as:
- Napkins
- Spoons
as well as the obvious sales tax that is charged and remitted to the Georgia Department of Revenue on meals.
Summary Checklist for Georgia Hookah Lounge Owners:
- Proof of tobacco tax paid.
- Monthly sales tax returns aligned with gross sales.
- Documentation for mandatory vs. voluntary gratuities.
- Proof of sales tax paid on consumables and meals.
- Awareness of cover charges and admissions being subject to tax.
Conclusion
Understanding these audit requirements can help you avoid severe consequences like forfeiture of goods or criminal investigation. It’s critical to maintain accurate records and ensure compliance with both tobacco and sales tax regulations.
Frequently Asked Questions
What taxes are hookah lounge owners in Georgia responsible for?
Hookah lounge owners must pay both tobacco tax and sales tax. Tobacco tax is due when purchasing tobacco products, and sales tax applies to food, drink, admissions, and certain gratuities.
What happens if I didn’t pay the tobacco tax?
If the tobacco tax hasn’t been paid, the state may confiscate your tobacco products. Additionally, you may be referred to the Criminal Investigations Division for further legal action.
Are cover charges at hookah lounges taxable in Georgia?
Yes, Georgia taxes admissions and participation in amusement activities, which includes cover charges and door fees at hookah lounges.
Do I need to pay sales tax on items like napkins and utensils?
Yes, sales tax must be paid on consumables such as napkins, spoons, and any meals provided. Proof of tax payment on these items is required during an audit.
How are gratuities treated for sales tax purposes?
Mandatory gratuities tied to a taxable sale are subject to sales tax. Voluntary tips, however, are not taxable. It’s important to clearly distinguish between the two in your records.