On Sunday, July 31, 2011, the Atlanta-Journal Constitution (AJC) reported on page 1 of the Business Section that the Georgia Department of Revenue had recently hired 90 new auditors and 40 additional collection staff. I’ve noted this increase in previous entries. The article stresses that these auditors are not targeting specific industries, but we all know this not a fully honest statement. There is a concerted effort to audit contractors, restaurants, bars, hotels, and other service oriented businesses where the state knows they will likely have a collection. For the most part, manufacturers are not being audited since there is so little tax to be collected from them now that Georgia law exempt most of the manufacturing related items they purchase.
One of the items noted in this article is that restaurants are being assessed tax on mandatory gratuities. Yes, these are taxable in Georgia and most other states. The fact that they are separately stated does not matter since these servcies are integral with the sale and delivery of the meal. Also, these fees are paid to the restaurant and are not given direclty to the server. Optional or voluntayr gratuities are not subject to sales tax.
If you are a restaurant or have restaurant clients, make sure you have this area covered.
As simple as this sounds, many restaurants are not taxing these items. This is creating a liability for tax, interest, and penalty. It’s amazing how many companies are missing some of these basic issues which create liabilities for the company. Given the increased number of auditors the odds of your company being audited or one of your clients being audited has increased dramatically. Don’t wait to check to see if you are doing things correctly. By the time the auditor contacts you, it’s too late.
Ned Lenhart
President
Interstate Tax Strategies, P.C.