How to register and file Pennsylvania sales tax for a restaurant

A restaurant in Pennsylvania collects tax on most of what it sells, and the state wants to know about it before the first plate goes out. The Department of Revenue's Retailer's Information Guide, called REV-717, covers the license, the filing schedule, the payment rules and the penalties in one document. Here is the paperwork for an owner opening a first restaurant. Our guide on the meals tax explains the rates by county.

Do you need a sales tax license?

Yes. The department's guide says every person or entity making taxable sales of tangible personal property or services must obtain a sales tax license. Registration is done online through myPATH, the department's online business tax service, before you make taxable sales. All applicants must have filed all required Pennsylvania tax returns and paid all Pennsylvania taxes, or the license will not be issued or renewed. Failure to be licensed may subject the seller to a fine.

What does the license look like in practice?

If you operate more than one place of business in Pennsylvania, a copy of the license must be displayed at each location. Sales, use and hotel occupancy licenses renew automatically every five years, provided there are no outstanding filing obligations or tax liabilities. So the main duty after registering is to keep every return filed, even in a slow month. A missed return can block the renewal.

What is taxable at a restaurant?

Tax is generally imposed on food and beverages sold by a caterer or an establishment selling ready-to-eat food and beverages, for consumption on or off the premises, on a take-out or to-go basis, or delivered. The legal list of such establishments includes restaurants, cafes, lunch counters, taverns, fast food operations, pizzerias, lunch trucks, cafeterias, coffee shops and similar places, mobile or immobile. For catering, rentals of silverware, tables, chairs and linens used in providing the service are taxable to the customer, even if separately stated. The state rate is 6 percent, with a further 1 percent in Allegheny County and 2 percent in Philadelphia.

How often will you file?

Filing frequency depends on your actual tax liability. A licensee with liability of less than $25,000 and more than $600 per quarter files monthly. One with less than $600 per quarter but more than $300 annually files quarterly. One with $300 or less annually files semi-annually, with returns due August 20 for January to June and February 20 for July to December. Larger accounts pay prepayments under the accelerated sales tax rules. Most restaurants will land in the monthly group.

When are returns due?

Monthly returns are due the 20th day of the month following the end of each calendar month, and quarterly returns the 20th of the month after the quarter ends. If the 20th falls on a weekend or a federal holiday, the return is due the next business day. Tax must be collected at the time of sale unless the sale is on credit, and tax and fees on credit sales must be remitted within 30 days of the sale.

How do you pay, and what are the penalties?

The department's guide says taxpayers can file returns and payments electronically for free through myPATH. Payments of $1,000 or more must be made by electronic funds transfer, and failing to do so may bring a penalty of 3 percent of the total tax due, not to exceed $500. A return that is not filed by its due date carries an addition of 5 percent of the tax due for each month or fraction of a month. Timely filers receive a vendor discount that is the lesser of $25 or 1 percent of the tax collected for a monthly filer. All tax documents must also be filed even when payments are made by EFT.

How do you keep the money safe?

Sales tax is the state's money in your account. Move it to a separate account each week and pay the return from there. Match the tax on your register report to the return for the same period before you file. If you sell both taxable and untaxable items, such as packaged goods, make sure your register has separate tax codes. The department's guide says food that is not ready to eat is generally exempt, while ready-to-eat items sold from a restaurant are taxed, so a bag of coffee beans and a cup of hot coffee can be treated differently. Review your menu and retail shelf once a year with your accountant, write down how each item is coded and keep the note with your records.

What should you do next?

Register on myPATH before the first sale. Put your filing dates in your calendar, with the 20th as the deadline and a reminder a week before. Read the department's taxability list for any item you are unsure about. Then read how the meals tax rates differ by county.

More guides for your business:

• Pennsylvania meals and sales tax in Philadelphia and Allegheny County for restaurants
• Pennsylvania food manager certification and health inspections for restaurants
• Philadelphia sidewalk cafe license rules

More in the US guides for food businesses.