The sales tax on food sold by Sacramento’s mobile food trucks can be an accounting nightmare, says the September 28, 2013 Sacramento Bee article by Claudia Buck, “Mobile food trucks: Food to go with a side of sales tax.” Food truck owners are required to compute and remit the sales tax for every slice of potato, drink, differentiating carbonated water which is taxed from bottled water, which is not taxed. And for each person being served from the truck window, each piece of food must be taxed and the tax sent into the government.
With the mobile food truck industry revving up in California, sales tax is becoming a sizable issue, notes the Sacramento Bee article. Since 2010, the number of licensed mobile food operators jumped more than 45 percent, with an estimated 4,000 statewide, according to the State Board of Equalization. At the same time, the amount of annual sales tax forked over by food truck owners is getting heftier, hitting $12.2 million in 2012.
State tax officials are making sure these mobile businesses know how to comply with California’s individualized sales tax requirements
Tax gets complicated when you have to account for every slice of food served. More precise yet is that whenever a mobile food truck crosses a county line or city limits, the owner has to charge the prevailing sales tax in that locale. The food truck owner must learn what to charge for each part of Sacramento and make sure the amounts are accounting for in writing to prove where you’ve been and how much tax you’ve collected on each piece of food for each part of Sacramento. For example, if the food truck sells you food in West Sacramento, the sales tax is 8.0 percent. Then when the food truck moves to Roseville to sell the same food, at a different time of day, it must switch the tax rate to 7.5 percent.
And if the truck makes a stop in Sacramento city, it must charge 8.5 percent. That means if you’re selling any given food, lets say burgers and fries, whether at lunch or dinner time, the location determines how much tax to collect on the same type of food. You’d need to collect the tax, keep a written record of each sale and the tax charged, and then remit the sales tax to the government and keep that written proof of where you’ve been and what you collected tax on each serving of food sold. For many mobile food truck owners, it’s complicated because of the state’s rules on how much sales tax to charge on food that’s packaged to take out.
The rules get even more precise depending on the temperature of the take-out food.
If it’s a cold sandwich, there’s no tax. If it’s a hot item, there is. If it’s an ordinary breakfast muffin, it’s not taxed. If it’s a cooked egg-muffin-type item, it is. Cold sodas are taxed, but not bottled water. Carbonated water is taxed. That means plain water carbonated and not sweetened, not soda with sweeteners. What about warm sodas never refrigerated?
The lucky mobile food truck owner in Sacramento has restaurant software to compute the tax rates as they change by location and by food. Is the food truck packaging the food to go or does it have chairs and tables in front of the truck where people sit down to eat? Not all mobile food trucks can afford restaurant software to compute the taxes. Some use paper and pencils and have to take the time to do the tedious work of computing sales tax for each location the truck drives to during each day. Mobile food truck ownership is more that joining the Food Network.”
The Board of Equalization – State of California collects all sales taxes on prepared food, whether it’s served in a sit-down restaurant or at a stand-in-line truck, then doles out the local share to cities and counties. The same tax rules apply to trucks, carts or stands that do not have a permanent physical location. If you’re thinking of opening a mobile food truck business, you may want to use the same cash register software for all locations as sit-down restaurants use to compute your state taxes as you change locations during the day.
The software, which costs about $300 a month, according to the Sacramento Bee article, also helps prevent employee theft because the software knows each sales and how much tax was collected for each sale. It’s expensive to start a food truck business. You need to buy a mobile food truck which costs anywhere from $25,000 or more if you buy a used one. Then you have to spend thousands more to make it look like new and put in grills, friers, and all types of wrapping papers. Then you have to spend more for accounting software. The questions is whether it’s more flexible than a sit-down restaurant?
So far not many Sacramento food trucks are offering health foods, vegan foods, raw foods, dehydrated foods, or any type of vegetarian-friendly foods free of fats, salts, sugars, and other added flavors that make you want to come back for more based on bursts of tastes on your tongue. The taxes confuse many people and are paid quarterly. What Sacramento needs most for food truck owners are classes or workshops in how to report and remit the state taxes. With the rules so legalese instead of English-ease, more workshops would be nice for those thinking of opening businesses.
There is help at the Board of Equalization website, where there’s a phone number you can call. For the customer, food truck owners need to post a message that the foods are charged sales tax, except for foods that aren’t taxed, like plain bottled water, but carbonated water is taxed. If you post “all prices include sales tax” hopefully a customer will ask first before ordering whether the cash amount the customer has will cover the tax and the food together. Some of the burgers on food trucks cost the same or more than what you’d pay in a sit-down restaurant or fast-food eatery. If a burger is $7 or $8 plus tax, the customer needs to know the charge will be more than what’s printed on the menu after tax is added.