Who this is for
- US restaurants, cafes and bars that collect sales tax through a POS
- Owners whose sales tax is filed and paid by an auto-pay service, a bookkeeper or themselves
Not covered here
- Recording daily POS sales, tips and card fees in the books
- The sales tax payable account in the ledger
- Due dates, missed returns and state audits
- States other than the California, Pennsylvania and Texas examples: check your own state's rules
How do I match the POS, the auto-pay withdrawals, the return and the books?
Match four records for the same period and the same location, in this order: the POS sales and tax report, the return as filed, the bank withdrawals, then the books. Each link should agree except for a short list of known differences. If a gap is not on that list, find the taxed lines behind it; do not adjust the payable to make it tie.
If an auto-pay service files from your POS data, the return will usually equal the POS report, so that tie proves little: a wrong item setting or rate flows into both. Test the POS against your state's rules.
| Compare | They should agree, except for |
|---|---|
| POS report to return: taxable sales and tax | Item tax settings, service charges, discounts, comps, gift cards, rounding, local rates |
| Return to withdrawals: amount due | Timely-filing discount, earlier prepayments, credits, penalty or interest, any fee the service charges |
| Withdrawals to books: sales tax payable | Timing at period end; see the payable that does not match the return |
Form 1099-K reports card and payment-app totals by month, before fees, refunds and discounts, as the whole transaction amount, so it is not a taxable-sales figure. If it does not tie, see reconciling sales and payouts.
Sales tax is a state and local tax, so one POS setup can be right in one state and wrong in another. This page uses California, Pennsylvania and Texas as examples. For another state, find its revenue department's restaurant guidance and answer the same questions. Confirm your own state's rule before changing a setting.
A case is not simple when withdrawals, POS totals and returns disagree by more than rounding for two or more periods, when there are several locations, delivery or online-order platforms or mandatory service charges, or when a state notice has arrived. Gather the POS sales and tax summaries, each filed return with its payment confirmation, the bank statements, the platform statements and any state notices. If a service files for you, ask it for a copy of each filed return and payment confirmation, and compare them with your state's online account where there is one.
Which POS report shows the sales tax I collected?
Pull the POS sales and tax report for the exact return period, with the same first and last day and the same location. Report names vary by POS (sales summary, tax report), and you may need two of them to see every line below.
Pennsylvania's regulation says records for each store must show gross sales for each day and each reporting period, split into taxable and nontaxable sales, plus the tax collected. Total sales should also be divided into cash and credit. The Department's restaurant guidance adds that the tax must be shown apart from total sales.
| Line the report should show | Why the return needs it |
|---|---|
| Gross sales | The starting point; California wants records of gross receipts from all sales, even ones you consider exempt |
| Discounts, coupons, comps, voids, refunds | Tax applies to the amount actually received |
| Mandatory service charges | Taxable in some states, not in others |
| Nontaxable sales | Items the state exempts |
| Taxable sales | What the rate is applied to |
| Tax collected, by rate or location | The number to compare with the return |
| Tips, card and cash | Part of what customers paid, usually not taxable sales |
| How customers paid: cash, card, gift card, delivery platform | Ties the report to the bank and platform deposits |
On filing day, do I add all gross sales and subtract the tax percentage?
No. Start from the POS taxable sales line for the period, then test that line against your state's rules, because it is only as right as the item settings. Subtracting the percentage from gross sales fails for several reasons.
- The figure may already include tax. Taxable sales are then the total divided by one plus the rate, not the total minus the rate. Check that tax really is included: Texas requires it separately stated unless a sign and written statement say otherwise, and California counts a drink price as tax-included when a notice is posted.
- Gross includes things that are not taxable sales, such as optional tips, exempt items and gift card sales.
- Gross sales may leave out a service charge the state taxes.
- Discounts and comps change the amount that is taxed.
- Rates differ by location.
California's seller's permit guide shows the order: the records start from gross receipts on all sales and then support each deduction the return claims. Most state returns follow the same order, so check your state's form: gross sales, less what the state does not tax, equals taxable sales; tax is taxable sales times the combined rate (state plus local).
Which items change taxable sales: tips, service charges, discounts, comps, gift cards?
Five items cause most of the differences. States treat them differently.
| Item | California | Pennsylvania | Texas |
|---|---|---|---|
| Optional tip | Not taxed if entirely optional and kept by employees (Pub 22) | Not taxed when separately stated on the receipt (Department) | No tax on a voluntary gratuity (Comptroller) |
| Mandatory service charge or auto-gratuity | Taxable | Not stated on the Department's restaurant page; see its FAQ topic "Surcharges" | Not taxed up to 20% if labeled tip or gratuity on the bill and paid only to employees who regularly provide the service; a mandatory gratuity above that is taxable; the mixed beverage FAQ applies the same rule to the whole charge, not only the excess |
| Coupon or discount | Tax is on the amount received; a reimbursement from the promoter is taxable too | A coupon sets a new price if the item and the coupon are both described on the register tape; if not, tax is due on the full amount (Department) | A coupon is a discount if you are not reimbursed; tax is on the amount charged |
| Comped meal or drink | The restaurant is the consumer; tax is due on the cost of items such as alcohol and carbonated soft drinks given away, reported as use tax (tax a business owes on items it uses itself) | Not stated on the Department's restaurant page; see its FAQ topic "Complimentary Food and Beverages" | Not taxable as a sale, but tax is due on taxable items given away, such as soft drinks |
| Gift card | Selling the card is not in total sales; the sale is reported when the card is used | Card not taxed; tax is due on the food bought with it | Card sale not taxed; tax is computed on the meal when redeemed |
California entries come from Publication 22 (tips to comps) and Publication 73 (gift certificates). Texas entries come from the Comptroller's restaurant publication, which is older, so confirm the current rule.
For where tips and service charges go in the books, see card tips: revenue or liability.
Why does the tax my POS collected differ from tax figured on taxable sales?
The POS tax is the sum of tax charged ticket by ticket. Tax figured on taxable sales applies one rate to the period total. They differ when a setting or an assumption is off. List the taxed lines before changing anything.
| Cause | How to find it |
|---|---|
| An item set taxable or nontaxable wrongly. Pennsylvania, for example, lists alcoholic beverages, candy and unflavored bottled water as not taxed, except wine sold to go by a Wine Expanded Permit holder. California taxes alcohol but not cold food or hot beverages sold to go for a separate price, which need separate records to back the exemption | Run the period's tax by item or category and check each against the state's list |
| Philadelphia alcohol: bars and restaurants also charge the City's Liquor Tax of 10%, except on sales subject to the state sales tax. It is paid to the City by the 25th of the next month and filed quarterly, not on the state return | Total the POS alcohol lines and tie them to the City's Liquor Tax payments |
| Texas alcohol sold by a mixed beverage permit holder for drinking on the premises: taxed at 8.25% and reported on separate mixed beverage reports, not the sales tax return. To-go, pickup and delivery alcohol stays on the return (Comptroller) | Total the POS alcohol lines on and off the premises, and tie the first to the mixed beverage sales tax report |
| A POS rate that is not the combined rate for the address | Compare the POS rate with the state's rate lookup, such as Texas's rate locator; check delivery orders separately |
| Service charges or tips taxed, or not taxed, differently from the state's rule | Pull the service charge and tip lines and test them against the table above |
| Discounts taxed before or after the discount | Compare tax on a discounted ticket with tax on the amount received |
| Rounding. Pennsylvania figures tax on each sale with a bracket table for the cents; California lets a business round the return to whole dollars; Texas rounds each sale's tax to the cent at the third decimal | Cents per ticket, which add up over a period, or under a dollar on a return rounded to whole dollars, point to rounding |
| Voids and refunds that fall in a later period than the sale | Check the report's date basis against the return period |
The extra or missing tax does not disappear. In California, tax collected above what is due must be returned to the customer or paid to the state and reported on the return. In Pennsylvania, the regulation has the seller remit the greater of the tax due or the tax collected, unless the overcharge was refunded to the customer, and a seller who charged too little still owes the correct amount. So decide each difference by the state's rule, then fix the POS setting going forward. A return already filed is corrected through your state's amended-return process, so tell the filing service; see the payable that does not match the return for when to amend.
Which bank withdrawal matches which return?
Match by period, not by date. A withdrawal near the due date (the 20th in Pennsylvania and Texas, the last day of the month in California, the 24th for a California prepayment) usually pays the last period that ended, or a prepayment toward one still running. The return's period decides which sales the money covers; the withdrawal date only shows when the service paid.
| State | Return covers | Return and payment due | Earlier payments that count toward the same return |
|---|---|---|---|
| California | A period set on the permit: monthly, quarterly, quarterly prepay, fiscal annual or annual | Last day of the month after the period ends | Quarterly prepay filers, told in writing once average taxable sales reach $17,000 a month, prepay at least 90% of each of the first two months' tax by the 24th of the next month; April to June has its own rule (section 6471, section 6472) |
| Pennsylvania | Month, quarter or half-year, set by tax liability | The 20th of the month after a monthly or quarterly period, the next business day if a monthly return falls on a weekend or federal holiday; semi-annual returns are due August 20 (January to June) and February 20 (July to December) | Larger monthly filers, from $25,000 of tax a quarter, prepay 50% of the tax for the same month a year earlier (the lower level may use the current month's actual tax) by the 20th of that month; the balance is due with the return the next month |
| Texas | Month, quarter or year, as the Comptroller assigns | The 20th of the month after a monthly period; quarterly returns on April 20, July 20, October 20 and January 20; yearly returns on January 20 | Optional prepayment by the 15th of the month being reported for a monthly filer (January's by January 15), or the 15th of the second month of the quarter |
Sources: California Publication 73, Pennsylvania REV-717, Texas Comptroller and its prepayment answers. California also lets a business schedule the bank payment for any banking day up to the due date, so a service may withdraw earlier than the due date. A Texas restaurant with a mixed beverage permit also files two separate monthly mixed beverage reports, so match those reports and their payments too.
For each return, add every withdrawal that paid it (a prepayment plus the balance) and compare the total with the amount due after any discount. Then check the other direction: every withdrawal needs a filed return, and every return a withdrawal. A return with no payment, a payment with no return, a returned or duplicate withdrawal, and a payment applied to the wrong period are the usual causes of a mismatch. If a withdrawal includes the service's own fee, that is an expense, not tax.
Does the timely-filing discount change the amount I match?
In a state that gives one, yes. The POS tax and the return's tax agree before the discount. The withdrawal equals the return's tax minus the discount. A withdrawal that is short by exactly the discount is expected there.
| State | Discount | Condition |
|---|---|---|
| Pennsylvania | 1% of tax collected, capped at $25 for a monthly filer, $75 quarterly or $150 semi-annually | Return and payment on time; no discount on a late return |
| Texas | 0.5% of tax timely reported and paid, plus 1.25% for prepaying | Monthly or quarterly filers: prepay at least 90% of the period's tax or 100% of the same period a year earlier, then file on time and pay the balance |
Not every state gives a discount; California's seller's permit publication describes none. For a Texas prepayer, the return's prepayment credit is larger than the cash prepaid, because it adds the prepayment discount back, and the 0.5% timely discount applies only to the balance left after that credit (Form 01-922 instructions). So the prepayment and the balance together equal the tax due less both discounts. A late filing can change the withdrawal as well as add penalty. Where the discount sits in the ledger is covered in sales tax collected and paid.
How do delivery and online-ordering sales belong on the return?
It depends on who sells the meal, which the platform agreement and the state decide. When you are the retailer, the platform's payout is not the taxable sales figure, because it is net of commission.
- Your own delivery, website or drivers: you collect and report. Pennsylvania taxes the food and any related delivery and service fee.
- A platform acting as your agent: in California, the restaurant is the retailer and owes tax on the full selling price, with no deduction for the commission. If the agreement does not make the platform an agent, the platform is a retailer that holds its own permit, and the restaurant must obtain a resale certificate from it (the platform's proof that it buys the meal to resell it). A delivery company can also elect to be treated as a marketplace facilitator; while its election is in effect, it, not the restaurant, is the retailer that owes the tax on the orders it handles (Regulation 1684.5). Ask each app whether it has elected.
- A platform that contracts with you and collects the tax: in Pennsylvania, the platform collects and remits tax on the food and its fees. The restaurant treats the sale to it as an exempt resale, and the commission the platform charges you is not taxed. As evidence, keep the platform's blanket exemption certificate (the Department names Form REV-1220) or the contract clause saying it collects the tax. With no contract, the platform pays you the sales tax on the food, so those orders stay in your taxable sales.
- Texas: the Comptroller says a marketplace provider that processes sales or payments for third-party sellers must collect and remit sales tax on those sales. It does not say whether a delivery app is one for restaurant meals, so ask the platform which orders it taxed.
Read each platform agreement, split the orders by who collected the tax, and tie each statement's tax line to the POS. For deposits net of commission, fees and tips, see processor deposits.
Who is liable when an auto-pay service files for me?
In California, Pennsylvania and Texas, the business that holds the sales tax permit. California says the seller is responsible for paying the correct amount and lets an accountant file under the accountant's own online profile. Pennsylvania says the seller is liable for reporting and remitting, and its regulation treats collected tax as a trust fund, money you hold for the state. Texas says you are responsible for collecting and paying the correct amount.
The people behind the business can owe the tax too. A sole proprietor owes it directly. In California, after a business ends, an officer, member, manager, partner or other person responsible for its returns or payments can owe the unpaid tax it charged customers if the failure was willful, for the periods they held that role. The state must serve its notice within 3 years of learning the business ended or 8 years after it ended, whichever is earlier (section 6829). Check Pennsylvania's and Texas's rules for owners and officers.
None of the California, Pennsylvania or Texas sources says a filing service takes on the seller's liability. Streamlined Sales Tax states treat a certified service provider differently; see outsourcing sales tax filing for that and for who should file. What the service owes you for its own mistakes depends on your agreement with it. Because the return is yours, check each filed return against the POS report.
How long do I keep POS reports, and what do states expect them to show?
Keep them for the period your state sets, and for longer while an audit or dispute is open. Pennsylvania wants records for each store for the current year and 3 prior calendar years, on paper or electronic (Department). California says to keep sales and use tax records at least 4 years (Publication 73), and Texas says at least 4 years (Comptroller).
California's restaurant publication also says to keep a written record of complimentary items. Keep the POS reports as they print, since a corrected copy does not show what was reported. For the federal rule, see how long to keep business records.
Example
These examples are illustrative. Amounts are in US dollars.
March: a cafe where everything ties
The cafe is in a state with a 7% combined rate and a timely-filing discount like Pennsylvania's: 1% of the tax, capped at $25 for a monthly filer. March taxable sales are $50,000, so tax is $3,500. The POS shows $53,500 collected including tax.
Taking 7% off $53,500 leaves $49,755, which is $245 short of the true $50,000 and gives tax of about $3,483, not $3,500. Dividing by 1.07 gives $50,000, and so does the POS taxable-sales line.
The return shows $3,500 of tax. The discount is the lesser of $35 and $25, so $25. The auto-pay withdraws $3,475 on April 20. POS tax ($3,500) equals return tax ($3,500), and the withdrawal ($3,475) equals the return less the $25 discount.
April: the POS collected $210 more than the return
The April return shows taxable sales of $50,000 and tax of $3,500. The POS tax report shows $3,710. Listing the taxed lines finds $3,000 of mandatory service charges, outside the $50,000, that the POS taxed at 7%: $210.
If the state taxes that charge, the return was short by $210 and the period may need correcting. If it does not, the POS setting is wrong and the $210 is excess tax handled under the state's rule. Either way, the answer is found in the taxed lines, not by changing the payable.
A delivery app that keeps a commission
A restaurant sends $10,000 of orders through a delivery app that keeps $2,000 as commission. If the app acts as the restaurant's agent, as California treats it when the agreement establishes agency, the return starts from the full $10,000, not the $8,000 the app pays out, unless the app has elected to be the retailer and owes the tax itself. In a state like Pennsylvania, where the app collects and remits the tax under a contract, the restaurant treats the sale to the app as an exempt resale.
Different for you?
- Withdrawals, POS totals and filed returns disagree by more than rounding for two or more periods, you have several locations or delivery apps, or a state notice has arrived: which figure is right for each period, whether earlier returns need correcting, and how the POS tax settings and auto-pay should run from now on are judgment calls. Bring the POS tax reports, returns, withdrawals and platform statements to bookkeeping, and see the state audit guide if a notice came.
- Your books are months behind, so there is nothing to match the returns to: see catching up on overdue books.
- Your sales tax payable in the books does not match the filed return: see the payable that does not match the return.
- You missed returns, got an estimated bill, or an owner may owe collected tax personally: see filing sales tax returns.
- You need to book the day's POS sales, tips and card fees: see recording daily POS sales.
- Much of your sales are cash: see cash business sales records.
- Tips, tip pools or service charges are mixed up: see card tips: revenue or liability.
- You want food cost, labor and sales on one statement: see the restaurant profit and loss statement.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| Texas mandatory gratuity not taxed up to this share of the meal price No tax on a mandatory gratuity at or below this share if it is separately and clearly labeled tip or gratuity on the bill and distributed only to employees who regularly provide the service; a mandatory gratuity above it is taxable. Publication 94-117 does not say whether only the excess is taxed; the Comptroller's mixed beverage FAQ, which applies the same rule, taxes the entire charge. Stated in an older Comptroller restaurant publication; confirm it is current. | 20% | Texas Comptroller: Restaurants and the Texas Sales Tax (publication 94-117) Checked |
| Philadelphia Liquor Tax rate Of the sale price of an alcoholic beverage sold by a licensed bar, restaurant, hotel, club or caterer in Philadelphia. Paid to the City by the 25th of the next month, filed quarterly, not on the state sales tax return. Retail sales subject to the Pennsylvania sales tax are exempt from it. | 10% | City of Philadelphia: Liquor Tax Checked |
| Texas mixed beverage sales tax rate Paid by the customer on alcoholic beverages (and mixers) sold by a mixed beverage permit holder for drinking on the premises, and reported on a separate mixed beverage sales tax report. To-go, pickup and delivery alcohol is not subject to it and goes on the sales tax return. | 8.25% | Texas Comptroller: Mixed Beverage Taxes Frequently Asked Questions Checked |
| California average monthly taxable sales at which quarterly tax prepayments are required Average taxable sales of this amount or more per month. The department notifies the business in writing; do not prepay without written authorization. | $17,000 | California CDTFA: Publication 73, Your California Seller's Permit (October 2026) Checked |
| California quarterly prepayment: share of each of the first two months' tax Minimum prepayment of state and local tax for each of the first two monthly periods of a quarter, due by the 24th day after each period ends. The April to June quarter has its own second prepayment rule. A business that operated through the same quarter a year earlier may instead prepay one-third of the tax measure reported for that quarter, at the current rate. | 90% | California Revenue and Taxation Code 6471, Prepayment Checked |
| Pennsylvania actual tax liability per quarter at which a monthly filer must prepay Accelerated Sales Tax level 1 (from this amount to just under $100,000 a quarter): prepay 50% of the tax for the same month of the preceding calendar year, or at least 50% of the actual tax for the current month. Level 2 (from $100,000 a quarter) uses the preceding calendar year only. Prepayments are due by the 20th of the current month; the return and remaining tax are due the 20th of the following month. | $25,000 | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Pennsylvania prepayment share of the same month's tax for accelerated sales tax filers Level 1 may measure it against the same month of the preceding calendar year or the actual tax for the current month; level 2 (from $100,000 a quarter) measures it against the same month of the preceding calendar year. | 50% | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Pennsylvania timely-filing discount rate Of the tax collected on a timely filed and paid sales, use and hotel occupancy return, limited to the cap for the filing frequency. No discount on a late return. | 1% | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Pennsylvania timely-filing discount cap, monthly filer The discount is the lesser of this amount or 1% of the tax collected. | $25 | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Pennsylvania timely-filing discount cap, quarterly filer The discount is the lesser of this amount or 1% of the tax collected. | $75 | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Pennsylvania timely-filing discount cap, semi-annual filer The discount is the lesser of this amount or 1% of the tax collected. | $150 | Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717) Checked |
| Texas timely-filing discount rate Of the amount of tax timely reported and paid, for permitted sales taxpayers. | 0.5% | Texas Comptroller: Sales and Use Tax Checked |
| Texas prepayment discount rate, in addition to the timely-filing discount Available to monthly or quarterly filers who prepay a reasonable estimate for the whole period and file and pay the balance on time. | 1.25% | Texas Comptroller: Sales and Use Tax Frequently Asked Questions Checked |
| Texas reasonable estimate for a prepayment discount: share of the current period's tax At least this share of the current period's total tax due; or the prior-year measure. | 90% | Texas Comptroller: Sales and Use Tax Frequently Asked Questions Checked |
| Texas reasonable estimate for a prepayment discount: share of the same period's tax a year earlier At least this share of the tax due and paid for the same reporting period in the previous year; or the current-period measure. | 100% | Texas Comptroller: Sales and Use Tax Frequently Asked Questions Checked |
| California responsible-person notice: years after the state learns the business ended A notice of deficiency determination against an officer, member, manager, partner or other responsible person must be served within this time after the last day of the month following the quarter in which the department learns of the termination, dissolution or abandonment, or within the longer-run limit counted from the end of the business, whichever expires earlier. | 3 years | California Revenue and Taxation Code 6829, Personal liability of responsible persons Checked |
| California responsible-person notice: years after the business ended Outer limit counted from the last day of the month following the quarter in which the entity's business was terminated, dissolved or abandoned; the earlier of this and the knowledge-based limit applies. | 8 years | California Revenue and Taxation Code 6829, Personal liability of responsible persons Checked |
| Pennsylvania restaurant sales tax records: years kept besides the current year Records, paper or electronic, kept for each store or outlet for the current year and the three previous calendar years. | 3 prior calendar years | Pennsylvania Department of Revenue: Restaurant Industry Guidance Checked |
| California minimum retention of sales and use tax records Unless the department authorizes destruction sooner; keep longer during an audit or dispute. | 4 years | California CDTFA: Publication 73, Your California Seller's Permit (October 2026) Checked |
| Texas minimum retention of sales and use tax records Unless the Comptroller authorizes earlier destruction in writing; keep records for the audited period until an audit is complete. | 4 years | Texas Comptroller: Keeping Records FAQ Checked |
Primary sources
- California CDTFA: Publication 22, Dining and Beverage Industry (January 2025)
- California CDTFA: Publication 73, Your California Seller's Permit (October 2026)
- Pennsylvania Department of Revenue: Restaurant Industry Guidance
- Pennsylvania Department of Revenue: Retailers' Information Guide (REV-717)
- Pennsylvania Department of Revenue: Sales Tax Discount Q&A
- Pennsylvania Department of Revenue: Sales Tax in the Restaurant Industry
- Pennsylvania Department of Revenue: Third Party Delivery Businesses
- 61 Pa. Code § 34.2, Keeping of records
- Texas Comptroller: Sales and Use Tax
- Texas Comptroller: Sales and Use Tax Frequently Asked Questions
- Texas Comptroller: Restaurants and the Texas Sales Tax (publication 94-117)
- Texas Comptroller: Mixed Beverage Taxes Frequently Asked Questions
- Texas Comptroller: Marketplace Providers
- Texas Comptroller: Sales Tax Collection FAQ
- Texas Comptroller: Keeping Records FAQ
- Texas Comptroller: Form 01-922, Texas Sales and Use Tax Return (instructions)
- California Revenue and Taxation Code 6471, Prepayment
- California Revenue and Taxation Code 6472, Prepayment due dates
- California Revenue and Taxation Code 6829, Personal liability of responsible persons
- California Regulation 1684.5, Marketplace facilitators
- City of Philadelphia: Liquor Tax
- IRS: Instructions for Form 1099-K
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.