FOOD AND BEVERAGE INDUSTRY DEVELOPMENTS – JUNE 2011
– 9% Sales Tax on Maryland Alcohol Sales
Effective July 1, 2011 the sales tax is 9% for sales of alcohol fit for beverage consumption (does not apply to cooking wine, baking extracts, etc.)
The 9% tax rate must be listed separately on the guest check
For catered events or events where alcohol is combined with the price of non-alcoholic items (i.e., all-you-can eat brunch with unlimited mimosas), itemized charges for equipment, supplies and labor directly related to the sales of alcoholic beverages should be taxed at 9% and itemized on the bill, otherwise the higher 9% rate must be charged on the whole bill if not itemized.
Sales and use tax returns have been revised to allow for separate reporting of sales taxed at 9% and those taxed at the current sales tax rate of 6%.
– I-9 Audits: Immigration and Customs Enforcement targeting the food and beverage industry for examinations of properly completed and retained employee Forms I-9.
Penalties range from $110 to $1,110 per violation, and one form may have multiple violations
Ensure the form is completed on the first date of employment for the employee and signed and dated as of that date
Ensure the employer signs and dates Section 2
Suggested practice is to keep one binder for original forms of all current employees, one binder for original forms of previous employees, and one binder to hold copies of all Forms I-9 for current and previous employees (in case of audit, the third binder will aid in the employer’s defense).
– Tip Reporting
IRS is now using data collected from Form 4137 (Social Security and Medicare Tax on Unreported Tip Income) to send bills to employers for their portion of FICA tax on previously unreported tips.
Ensure tipped employees required to report tips correctly report all tips and that FICA tax is paid on their tip income
8% Myth – There is a common false rumor that only 8% of sales need to be reported as tips. The 8% is the threshold below which employers may need to allocate tips; the law is that employees are to report and pay tax on 100% of all tips earned after tip-outs.
Tip Credit – Employers may be entitled to claim a tax credit equal to social security and Medicare tax paid on the portion of tips above minimum wage (frozen for this specific computation at $5.15/hour since 2007). The tax credit is claimed when the tax return is filed and may be used to offset any regular income tax liability.