Rhode Island meals and beverage tax for restaurants: how it works

Rhode Island restaurants collect two taxes on every meal, and they are reported together. The second is a local meals and beverage tax that goes back to the city or town where the meal was served. This guide, checked in October 2026, explains how both work, what is taxed and how to keep your register right. It is general information, not tax advice. Check the current rules with the Rhode Island Division of Taxation, because rates and rules can change.

What are the two taxes on a Rhode Island meal?

The Division of Taxation's restaurant guide says eating and drinking establishments must charge and collect the 7 percent state sales tax and a 1 percent local meals and beverage tax on meals and beverages. The two together make the rate guests see on the check. The Division's own pages describe the local tax as 1 percent of a business's taxable food sales gross receipts. Proposals to change the local tax have been reported in the news, so check for current rules at the start of each year.

Who must collect it?

Any business that meets the definition of an eating or drinking establishment must charge, collect and remit the tax. That covers restaurants, cafes, bars, food trucks and caterers. The tax applies whether the food is prepared on site and whether it is eaten on the premises or taken out. A prepared-food counter in a grocery store is treated differently for the 1 percent local tax, so ask the Division if that applies to you.

Are tips and service charges taxed?

Per the Division's guide, voluntary tips left by a guest for the wait staff are not subject to the sales tax or the meals and beverage tax. Mandatory gratuities, such as a service charge on a large party, are subject to both taxes. This is a common error. If you add an automatic gratuity for a party of six or more, tax it. Print the charge as its own line on the check, and tell guests in advance.

How do you set up your register?

• Enter the total rate for meals and drinks in your system.
• Run a test sale and calculate the tax by hand.
• Check that takeout and delivery orders use the same rate.
• Check that voluntary tips are not taxed and mandatory charges are.
• Print a test check and keep it in your files.

Check the settings after any rate change and once a quarter.

Where does the money go?

The 7 percent goes to the state. The 1 percent local tax received by the Division is distributed to the city or town where the meals and beverages were delivered. That is why the place of delivery matters if you cater or serve at a festival in another town. Keep records by location, so that your return is accurate.

What about catering, events and delivery?

Catering is generally taxable when the food is delivered, and the tax follows the delivery location for the local portion. For events, ask whether any charge is a service charge or a tip. For delivery through a third-party platform, ask the platform how it handles tax on your orders. For your own online or phone orders, you collect and remit the tax.

When are returns due?

The Division assigns a filing schedule based on your sales. Mark the dates on a calendar, file even when you have no sales and keep copies of each return. Late filing can bring penalties and interest.

What mistakes are common?

Common ones are leaving the 1 percent off takeout, not taxing a mandatory gratuity, using the wrong location for catering and forgetting to update the register after a change. A quick monthly review of one day's sales, line by line, finds most of these.

How do you handle a refund, a comped meal or a discount?

A comped meal is a free item, and tax rules vary on whether tax is due on it, so ask the Division. A discount reduces the taxable price, so the tax is on what the guest pays. A refund should reverse the tax on your return. Keep a manager's note for every void and comp, and review them weekly. A tight record also helps spot theft and mistakes.

How do you prepare for an audit?

Keep daily sales reports, bank deposits, tax returns, point-of-sale settings and invoices in an orderly file. Be able to show how you set your tax rate and when you last checked it. If the Division asks for records, respond quickly and in writing. An accountant who knows restaurants can sit in on the review and keep it calm.

How should you explain the total to guests?

A short line on the menu, such as prices do not include tax, saves arguments at the end of the meal. Train servers to say it kindly when a guest asks why the total is higher. Show the tax line clearly on the check and the receipt. Guests who understand the check tip more calmly and come back.

Want more guests so the tax bill means more sales?

Tax is a sign of business done. Mosey is a food-first app where diners find places by dish, mood and neighborhood and rate what they actually ate. A restaurant can host a menu page, show its best-rated dishes and reply to guests, so people searching for chowder, a grinder or a good dinner can find it.

More guides for your business:

• How do I get more customers to my Rhode Island restaurant? (2026)
• Rhode Island minimum wage and tipped wage for restaurants (2026 and 2027)
• Rhode Island paid sick leave for restaurants: what employers must offer

More in the US guides for food businesses.