Restaurant accounting built around prime cost, not just a year-end return.
Restaurants fail on margin, not on revenue. We run food-service books on a weekly prime-cost rhythm, keep tip reporting and payroll tax defensible, and make sure California sales tax on hot, cold, and to-go items is charged and remitted the way the CDTFA expects.
Full-service restaurants; quick service typically runs lower on labor.
Employer share of FICA on tips above the federal minimum-wage threshold, claimable as a credit.
The interval at which food and labor variance is still correctable.
Where restaurants & food service lose money on accounting.
Prime cost drifts before the P&L shows it
Cost of goods plus total labor is the number that decides whether a restaurant survives. Monthly statements report it too late. We track it weekly against sales so a two-point drift in food cost is caught in days, not after the quarter closes.
Tip reporting and the FICA tip credit
Tipped employees create allocated tip, Form 8027, and payroll tax exposure — and an often-unclaimed federal credit on the employer FICA paid on tips above minimum wage. We compute and claim the 45B credit and keep the underlying tip records audit-ready.
California sales tax on food is not one rate
Hot prepared food, cold food to go, catering, delivery-platform sales, and the 80/80 rule each behave differently under CDTFA guidance. Misapplied rules surface years later as an assessment with interest.
Third-party delivery reconciliation
DoorDash, Uber Eats, and Grubhub deposit net of commissions, marketing fees, and adjustments. Booking the deposit as revenue understates sales and overstates margin. We gross up every platform to actual sales and expense.
What a restaurants & food service engagement includes.
- Weekly prime cost reporting (COGS + labor as a percentage of sales)
- Point-of-sale to general-ledger integration (Toast, Square, Clover)
- Tip allocation, Form 8027, and the FICA tip credit (IRC §45B)
- CDTFA sales tax registration, filing, and audit support
- Delivery-platform revenue gross-up and fee analysis
- Multi-location comparative P&L and per-location labor targets
- Entity structure for owners operating more than one concept
Restaurants & Food Service: direct answers.
What does a CPA do for a restaurant that a bookkeeper does not?
A bookkeeper records what happened. A CPA is responsible for the tax and compliance positions behind it — sales tax treatment of food categories, the FICA tip credit, owner compensation and entity structure, depreciation on build-out and equipment, and representation if the CDTFA or IRS asks questions. At S&S CPA INC every engagement is reviewed by Selim Hanna, CPA.
What is prime cost and what should it be?
Prime cost is cost of goods sold plus total labor, expressed as a percentage of sales. Most full-service restaurants aim for 60 to 65 percent. Above roughly 70 percent, a restaurant is generally not profitable after rent and overhead regardless of sales volume.
Do restaurants in California charge sales tax on takeout food?
It depends on the item and the seller. Hot prepared food is generally taxable whether eaten in or taken out. Cold food to go is generally not taxable, unless the seller meets the CDTFA's 80/80 rule, in which case cold to-go food becomes taxable as well. Because the rule is applied per location, it should be tested each year.
How should delivery-app sales be recorded?
Record gross sales as revenue and the platform's commission, marketing, and processing charges as expense — never the net deposit as revenue. Recording net understates reported sales, distorts food-cost percentage, and creates a mismatch with the sales figures reported to the CDTFA.
Ready to work with a CPA firm that treats your finances like their own?
Schedule a complimentary consultation with Selim Hanna, CPA, and see how strategic advisory can protect and grow your business.