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Tennessee Revenue webinar: prepared food, delivery charges and tips are taxable in most hospitality sales
Summary
Tennessee Department of Revenue presenters told hospitality businesses that prepared food sales are subject to state (7%) plus local sales tax, delivery by the restaurant is taxable, and mandatory tips added to a bill are included in the sales price and taxable.
Katie Julian, a presenter with the Tennessee Department of Revenue, said sales of prepared food are taxable at the state rate and local option rates: “sales of prepared food and are subject to sales tax at the rate imposed, which is 7 percent is the state rate.”
Julian explained the rule applies broadly — meals furnished at hotels, clubs or drugstores — and noted reduced rates can apply to raw ingredients. She emphasized that delivery charges are taxable when the restaurant itself performs delivery and that mandatory tips automatically added to a bill must be included in the sales price and taxed. Kimberly Collins, from the departmentaudit section, advised businesses to keep consistent POS records and register keys for comp or discounted meals so auditors can verify reported costs.
