blog

date

March 25, 2025

blog

reading time

8 min

2025 Updated Restaurant Tax Regulations - What Every Restaurant Owner Needs to Know

Tax season is around the corner, and if you own a restaurant in North America, this is the article to read to catch up on the newly updated tax regulations.

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2025 is the year that has brought some of the biggest regulatory changes in nearly a decade.

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From new packaging taxes to stricter tip reporting and digital payment rules, the 2025 tax season could significantly impact your bottom line.

But don’t worry—this guide breaks it all down in a simple, practical way, so you can stay compliant and save money.

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Tax documents and gold coins with text "2025 Updated Restaurant Tax Regulations" on top, used as article header image.

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As a trusted POS provider to over 15,000 restaurants across North America, MenuSifu is committed to helping our partners stay informed and compliant. While we don't offer tax filing services, our all-in-one POS system helps streamline data tracking, reporting, and analysis—making tax season more manageable.

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Below is a comprehensive guide to navigating the new 2025 tax regulations for restaurant owners, operators, and managers so filling out tax forms can be easy.

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4 Essential Taxes Restaurants Must File in 2025

Income Tax

Restaurant income tax is based on your net profit, which is calculated as total sales minus deductible operating expenses (e.g., food costs, labor, rent, marketing, depreciation).

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Restaurant income tax = Restaurant sales revenue – Restaurant expenses = Restaurant profit/loss.

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Key update in 2025: You can now carry forward losses from the past 5 years (previously 3 years) to offset current profits.

Example: Your restaurant lost $80,000 in 2023 and turned a $120,000 profit in 2025. With the new policy, you only pay tax on $40,000.

Another update for 2025: Businesses with profits under $500,000 annually can file using the simplified Form 1120-SS, cutting required deduction lines from 46 to 18—saving significant time (around 15 hours) and accounting costs.

MenuSifu Tip: Use POS sales reports to accurately calculate net profits and streamline your income tax documentation.

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Group of people working together with calculators, tax forms, highlighters, and a notebook labeled "Tax Day" on a table.

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Sales Tax

Sales tax is a state and local tax collected by restaurants on behalf of customers.

The total sales tax rate varies by location and may include multiple components (e.g., 7.25% state tax + 2.5% city tax in Los Angeles).

Most restaurants file sales tax quarterly, but high-volume businesses may be required to file monthly (e.g., $300,000/month in taxable sales in NY).

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Big update for 2025: Delivery platforms like Uber Eats and DoorDash will start withholding and remitting sales tax on your behalf. However, restaurant owners are still responsible for reviewing the reports and reconciling discrepancies.

Additionally, if your restaurant accepts out-of-state orders through your website, you're now required to register and report taxes in the buyer's location.

MenuSifu Tip: Our POS system automatically separates sales by channel, helping you track taxable revenue accurately across dine-in, takeout, and third-party apps.

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Payroll Tax

These include:

FICA (Social Security & Medicare)
FUTA (Federal Unemployment)
SUTA (State Unemployment)

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In 2025, the IRS has introduced a Low-Wage Employee Credit: Hire workers earning ≤ $20/hour and receive $50 per month per employee (claimed through Form 5884-C).

You must also issue W2s or 1099s annually and file Form 941 quarterly to report federal wage taxes.

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Be aware of payroll deposit schedules:

Monthly, quarterly, or after each payroll, depending on your total liability.

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Estimated Tax

If your business owes more than $500 in annual federal income tax, you must pay estimated taxes four times per year:

April 15
June 15
September 15
January 15 (following year)

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Failing to prepay enough could result in penalties of 5% of the underpayment amount, plus interest based on the federal benchmark rate.

MenuSifu Tip: Access real-time revenue trends through your dashboard to better estimate future tax liability and plan payments.

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3 New Tax Forms & Policy Changes

Several new and updated policies are now in effect. Being aware of these updates can help you avoid fines and seize potential savings.

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U.S. 1040 income tax form with rolled-up dollar bills, black eyeglasses, and a pen placed on top.

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1. Takeout Packaging & Sugary Drink Taxes

8 states including New York, New Jersey, California, and Colorado have introduced eco-focused taxes:

A $0.10-$0.25 surcharge per takeout order based on the type of packaging used (e.g., plastic vs biodegradable).
Restaurants using eco-friendly materials may qualify for exemptions.
Some states like California now charge a 10% tax on sugary beverages like milk tea and bottled cocktails.

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Savings opportunity: Restaurants using biodegradable packaging can apply for tax exemptions.

MenuSifu Tip: Track your item-level packaging costs and drink sales using MenuSifu’s reporting tools to estimate your annual tax exposure.

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2. Digital Payment Regulations

Previously, platforms like PayPal and Venmo only issued 1099-K forms if:

Annual income > $20,000

200 transactions

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In 2025, the threshold drops to $2,500, and in 2026 it will fall to $600.

If your restaurant receives payments above these thresholds via CashApp, Zelle, etc., you will get a 1099-K from each platform and must report the income.

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To Avoid Trouble:

Use dedicated business accounts
Never mix personal and business transactions
Accurately reconcile 1099-K data with internal records

MenuSifu Tip: Our integrated digital payment tracking ensures every transaction is accounted for and easy to match against third-party statements.

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3. Mandatory Tip Reporting

The IRS now requires restaurants to electronically track and report tip income using approved software like TipTrack Pro.
Handwritten ledgers or Excel spreadsheets of tip reports will be considered invalid.
Tips must be reported daily by employees
Cash, card, and third-party platform tips must be itemized
If your restaurant’s cash tip ratio is ≤15%, you can file a simplified summary using Form 8023-S (but must maintain 90 days of POS backups)
Non-compliance penalties are up to 75% of unreported tips

MenuSifu Tip: It is best to track every dollar that comes in and out so that when it comes time to report tips, you will have everything ready and organized in no time.

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4 Tax Credits and Money-Saving Opportunities

⚡ Energy-Efficient Equipment

Get 30% of your equipment cost back (up to $50,000) when you invest in approved energy-saving appliances.

Applies to:

Commercial refrigerators
Dishwashers
Ovens
HVAC systems

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☀️ Solar Panels

Install solar in 2025 and receive:

35% federal tax credit
Up to 15% in state-level credits

Additional perks: net metering, cash rebates, reduced utility bills.

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🚗 Electric Vehicles

Switch to electric delivery vehicles and get:

Up to $7,500 in federal credits
Free charging stations or toll discounts in certain states

Great for ghost kitchens, fast food, and high-volume takeout businesses.

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💼 Low-Wage Hiring Credit

Employ workers making under $20/hour and earn:

$50/month per employee
$6,000/year for a 10-person team

MenuSifu Tip: Use our employee management feature to track eligibility for these credits and generate clean reports for your tax professional.

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3 Ways to Legally Reduce Your Tax Burden

You can stay compliant and minimize tax burdens by following these three key strategies:

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1. Track Every Expense

Common deductible expenses:

Equipment purchases & repairs
Marketing and social media ads
POS systems and SaaS fees
Uniforms and cleaning services
Delivery vehicle maintenance

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2. Start a Restaurant Retirement Fund

Restaurant owners can reduce taxes while building long-term savings.

Options:

SEP IRA (Simplified Employee Pension)
SIMPLE IRA (Savings Incentive Match Plan for Employees)
Solo 401(k)

All options allow for tax-deferred contributions by the employer and employees.

Bonus: Offering retirement and health plans can also help attract and retain talent.

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3. Work With a Professional Accountant

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A man in a suit working on a laptop and reviewing tax documents at a desk in a modern office setting.

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Restaurant-specialized accountants help:

File monthly/quarterly sales taxes
Manage labor tax filings
Avoid common audit triggers
Spot patterns in food cost inflation

They can also analyze:

Profit & loss statements
Menu item profitability
Real-time margins

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Now You Are Ready for Tax Season

But remember, whether it’s cash, card, or digital orders, all income must be reported and taxed. Don’t risk audits or penalties.

Failing to disclose income may result in audits, interest penalties, and legal consequences. Don’t take the risk—transparency is key.

MenuSifu doesn’t file taxes, but our POS MX system helps simplify your tax season by tracking everything from sales and tips to employee hours and deductions—so you can file with confidence.

Stay compliant. Save money. Operate smarter.

2025 is a game-changer for restaurant tax compliance. With new reporting thresholds, eco-taxes, labor credits, and equipment incentives, staying updated isn’t optional—it’s critical.

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