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If you’re a restaurant owner in Illinois, learn how employee meals can trigger use tax during sales tax audits and how to document them properly.
Restaurant Sales Tax Audit and Employee Meals in Illinois
Understanding Use Tax on Employee Meals
If you are being audited for sales tax in the state of Illinois, you might be surprised to find out that employee meals are subject to use tax. Make sure you are recording the number of meals that you are giving out each night so that the auditors do not consider the sales to be those made to customers, instead of your employees.
Use tax is far less in Illinois as compared to sales tax.
🎥 Video Explanation
Transcript
Q&A from Donna, Plainfield, Illinois
“Am I supposed to be taxing my employees for their meals?”
So, Donna, my assumption is that you’re a restaurant owner and you give out employee meals.
The Illinois Tax Complication
The real kicker here is that you’re living in the state of Illinois. Your business is in the state of Illinois, and that’s the trickiest part of this whole equation.
Because the state of Illinois says:
If you’re actually going to give out a plate of food to your employees as their employee meal—even though it’s a perk—you actually have to charge use tax on that.
Clarifying the Tax
- The employee doesn’t necessarily have to pay you the $10.
- You don’t have to charge the full sales tax on that $10.
- You do have to charge the use tax, which is about $0.625.
Documentation is Key
It’s unfortunate, but you should:
- Document all of your employee meals
- Otherwise, the auditor may say:
“These are meals that were probably prepared and sold, and you should have been charging full sales tax on that.”
Example
If you’re giving out 12 employee meals a night, you are:
- Charging use tax of 6.25% times the total meal value
- Required to report that to the state every month