Recording Daily POS Sales: Tips, Card Fees, Cash, Deposits

What goes on a daily sales entry from the POS end-of-day report?

Make one entry per business day from the POS end-of-day report (also called the close-out or Z report). Each line goes to a different place, because sales, sales tax, tips and service charges are different kinds of money. The IRS lets you use any recordkeeping system that clearly shows income and expenses; the layout below is a bookkeeping method, not an IRS-prescribed entry.

The entry balances when what customers paid (cash, card and other) equals sales plus sales tax plus tips plus service charges, plus any gift cards sold. If it does not, find the cause before posting; pushing the difference into sales hides it.

A day is not simple when it has card tips and staff to pay, mandatory service charges, a large share of cash, several registers or locations, employees who report tips, or a state that taxes tips or service charges differently. Gather the end-of-day reports, processor and bank statements, deposit slips and tip reports before you start.

Deposits that have not matched the POS for a month or more, days missing after a sync stopped, or tips and sales tax booked inconsistently are a different problem: a sales tax return or Form 1099-K that no longer ties may mean the back months have to be rebuilt. See the missing-days section and "Different for you?" at the end.

Should I enter one daily summary or every ticket?

One summary entry per day (per register or location) can be enough for the books when the POS keeps the ticket detail and you can produce it. In this method the summary is the book entry, and the POS report and tickets behind it are the proof. Publication 583 says computerized records must reconcile with your books and return. Enter ticket by ticket only when the books need item-level detail; for the choice in depth, see every order imported, or daily and payout summaries only.

A spreadsheet can work for a small restaurant: one row per day, one column per line in the table above, a cash counted and over/short column, and a check cell (payments minus sales, tax, tips and charges, which should be zero), with totals by month. If the POS posts to your accounting software on its own, check that its accounts match the table, and do not let a bank feed post the same deposits again.

How do card sales, processor fees and the next-day deposit fit together?

In this method, book the whole card amount on the day of the sale, in a holding account (the account that keeps card payments until the deposit arrives). When the deposit arrives, move it from the holding account to the bank and book the processor fee as an expense. A card deposit equals the day's card payments (tax and tips included) minus fees, refunds, chargebacks (disputed charges the processor takes back) and any holdback (money the processor keeps in reserve).

The holding balance should equal the batches not yet deposited plus any reserve still held; match each amount to the processor's reports. If the processor bills fees on a monthly statement or debits them from the bank, record each fee once.

Booking only the net deposit as sales mixes sales with tax, tips and fees: it can overstate or understate sales, and it hides the fee. It also cannot tie to Form 1099-K, which is reported before fees. Publication 583 recommends reconciling the bank account each month; a statement can include bank charges you have not yet entered. For payouts in depth, see reconciling sales, payouts and Form 1099-K; for a card reader app, see deposits net of fees and tips.

Where do sales tax, card tips and service charges go?

Sales tax collected for the state is usually not the business's sales, and neither are voluntary card tips. A required service charge is a sale.

Sales tax. Publication 334 says state and local sales taxes imposed on the buyer, which you must collect and pay over, are not income. Tax imposed on you as the seller is different: collecting it from the customer puts it in gross receipts. Check which kind your state imposes. Entries are in sales tax collected and paid; matching the POS to the return is in restaurant sales tax and POS reconciliation. A business that collects sales tax and does not pay it over still owes it, and some states make an owner or other responsible person personally liable; check yours.

Card tips. IRS Topic 761 treats charged tips (credit and debit card) that the employer distributes as cash tips the employee reports. Hold them in tips payable until paid. The IRS says tips received by self-employed workers are also income, so a sole owner who keeps the tips generally treats them as business income. An owner who is an employee of their own corporation is a payroll question. Paying staff is in card tips: revenue or liability.

Service charges. A charge the customer must pay, such as a large-party charge or a payment prompt that forces a tip above zero, is not a tip, whatever the receipt calls it: the IRS looks at the facts. Book it on its own sales line. When it is paid to an employee, Topic 761 treats it as non-tip wages subject to Social Security, Medicare and federal income tax withholding, so the payout is wages, not tips payable. Tax withheld from staff pay, including tips and service charges paid as wages, is held for the IRS; a person responsible for collecting and paying it over who willfully fails to do so can be personally liable for a penalty equal to the tax.

Whether sales tax applies to tips and service charges is state law. In California, optional tips that employees keep are not taxed, while mandatory tips and required service charges are in taxable gross receipts (CDTFA Publication 22). That is one state's rule; check yours.

How do I record cash sales, the drawer count and the cash deposit?

Post cash sales from the POS cash line, count the drawer, and compare the count with what the POS expects. Record any difference in a cash over/short account (the account that takes drawer differences), not in sales. Deposit the cash in full and keep the slip.

Publication 583 says to deposit all daily receipts in the business account, note the source on each deposit slip, and make business payments by check to document them. Paying vendors from the till is hard to document. If cash does leave the till (a vendor, a refund), keep a slip for each payment; the deposit is smaller by that amount.

A cash-heavy business needs more: see recording cash sales in a cash-heavy business. For refunds, see recording refunds.

Why doesn't my deposit equal my daily sales, and how do I find the difference?

A deposit differs from a day's sales for a short list of known reasons. Compare the same days, then work through the list.

To find the gap:

1. Pick one week and list each day's cash and card totals from the end-of-day reports.
2. Match each card batch to one bank deposit, and the cash to the deposit slips.
3. Subtract the fees, refunds, paid-outs and holdbacks from the table.
4. What is left is the real gap. Look for a day entered twice (a POS sync and a bank feed both posting), a day not entered, or a deposit made to another account.

Post each explained cause to its own account. If the holding account keeps a balance that never clears, see an undeposited funds balance that will not clear.

What do I keep as proof for each day?

Keep the end-of-day report and register tape, the drawer count sheet and paid-out slips, the cash deposit slip, the card batch report, the processor's monthly statement, the bank statement, and the employees' written tip reports. Publication 583 names cash register tapes, bank deposit slips and credit card charge slips among the documents that show gross receipts.

Keep records that support an item on a return until the period of limitations for that return runs out. Keep employment tax records, such as payroll and the tip amounts employees report to you, for at least four years. Your state's tax agency sets the period for sales tax records; check it.

How do the daily entries tie to the 1099-K and the sales tax return?

The year's gross card payments should tie to each processor's Form 1099-K box 1a, once you bridge any year-end difference between sale dates and the processor's transfer dates. The sales tax payable you booked for a filing period should tie to the tax on the return for that period.

The Form 1099-K instructions define box 1a as the gross amount without regard to fees, refunds or other adjustments, with each transaction's amount set on the transaction date. The form covers payments the processor settles in the calendar year, which means the year it submits the instruction to transfer the funds to you, so a sale on the last day of the year can land on the next year's form. That gross amount includes sales tax, as the Treasury's preamble to its final regulations says (IRB 2011-23), and Publication 334 warns that the form may include items that are not business receipts. So the form is usually larger than your card deposits, and larger than your card sales alone because the sales tax and tips are in it. Cash sales never appear on the form. A POS business day that runs past midnight can also put a late sale on a different date than the processor uses, so check the last days of the year by hand.

Box 1c is new on the current form and is meant to show the cash tips in box 1a; the IRS counts credit and debit card tips as cash tips. An earlier form has no box 1c. Tie to box 1a, and take the tips from your own tips payable.

Posting the form itself as sales would count the same sales twice, because the daily entries already hold them. If it will not tie, see reconciling sales, payouts and Form 1099-K.

What if the POS sync stopped or weeks of days were never entered?

Rebuild from the POS history day by day, not from the deposits. Income you received but never recorded still counts: the IRS says you must report all income you receive from your business.

1. Find the last day that was entered correctly.
2. Ask the POS provider for the end-of-day reports for every missing day.
3. Post one entry per day, as above.
4. Reconcile each month to the bank and processor statements.
5. For a day with no POS report, rebuild card totals from the processor's batch reports and cash receipts from deposit slips, drawer counts, paid-out slips and any surviving sales records. A deposit alone misses cash paid out of the till or kept on hand, and one deposit may cover several days. Separate sales, tax and tips, mark the day as rebuilt, and mark amounts with no support as unresolved.
6. Compare the rebuilt sales tax with the returns already filed.

Step 6 is where problems surface. A filed sales tax return, tip report or Form 1099-K prepared from numbers that no longer tie may need a decision, with the filed numbers in hand, before anything is posted: whether it has to be corrected, and in what order. That is the point to bring the rebuilt months and the filed returns to a professional. For months already behind, see catching up on overdue books.

Example

Illustrative US-dollar amounts, round on purpose.

Cafe, one day

Assume the $160 is sales tax imposed on the buyer, the $200 is voluntary tips for employees, and no cash is paid out of the till and no reserve is held. The POS report shows $2,000 of sales, $160 of sales tax and $200 of card tips. Customers paid $540 in cash and $1,820 by card.

The two payment lines ($2,360) equal sales plus tax plus tips. The card deposit comes the next day, about $1,765: a 3% fee on $1,820 is about $55.

Where state law and your tip policy allow it, only the fee on the $200 of tips (about $6) can come out of the tips, and it cannot push an employee's pay below the required minimum wage; see card tips: revenue or liability.

Gift shop, one week

The POS shows $3,000 of sales for the week, all paid by card (no tax or tips, to keep it simple). The bank shows $2,880 of deposits.

The $120 gap is explained, not missing. The books show $3,000 of sales, $90 of fees and a $30 refund.

Restaurant, large party

A table's food and drink comes to $1,000 before tax, and the menu adds a mandatory 18% charge: $180. The books show it on its own sales line, and as wages when it is paid to servers, with payroll withholding. If the guest instead adds a voluntary $180 tip on the card, that $180 goes to tips payable, not sales.

Different for you?

• Deposits have not matched the POS for more than a month, the sync broke and days are missing, or tips, service charges and sales tax were booked inconsistently: a sales tax return or Form 1099-K that no longer ties may mean the back months have to be rebuilt. Bring the end-of-day reports, processor and bank statements, deposit slips and tip reports to bookkeeping.
• You need to pay card tips to staff or run a tip pool: see card tips: revenue or liability.
• Your sales tax withdrawals do not match the return: see restaurant sales tax and POS reconciliation.
• Much of your income is cash: see recording cash sales in a cash-heavy business.
• Some customers pay by app or QR code, or the money lands in a personal account: see business payments through payment apps before you total the day.
• You take payments through a card reader app or several platforms: see deposits net of fees and tips and reconciling sales, payouts and Form 1099-K.
• You want to read the daily numbers as a restaurant P&L: see the restaurant profit and loss statement.