Is it common (and legal) practice for bars to charge sales tax over listed menu prices when paying by credit but not by cash?
I don’t usually pay that much attention to things like this, but today at a bar I noticed that I was, as usually the case, charged the flat price listed in the menu for a drink when I paid in cash; later, when I purchased an appetizer and another drink and elected to pay by credit, the receipt listed showed sales tax and even specifically had a line labeling the entire billed amount (so both items) as taxable.
What gives? I understand that sales tax might already be included in the menu price in order to make cash management easier, but wouldn’t that imply that the bar is charging sales tax twice when I paid by credit? Or is the bar charging sales tax once in both cases but giving an implicit discount to customers paying in cash in order to simplify cash management while getting the most out of customers paying credit? Alternatively, are they just doing something wrong?
Maybe I’m just a suspicious sort, but I’d assume the bar is not paying their gross receipts tax on cash sales because they’re harder to track. I could be wrong, of course.
Sounds right. Was the place kind of divy? (Which one by name, if you want. I live here also.) Some small businesses will – illegally – skip tax for cash. Some you have to ask.
Ask anyone who does accounting or taxes for small businesses, and they’ll agree that bars are perhaps the least honest industry out there. Employees cheat their employers by abusing comps and pocketing payments. Employers cheat the government by under-reporting tips and sales. It’s hard to say which is the case without investigating it more closely.
(I suppose it’s possible that the practice is just meant to be a discount for cash customers, with tax being paid on a “discounted” price. But such a discount is probably a violation of the merchant services agreement.)
Bars are largely a cash business, so yeah, pretty much everyone is skimming off everyone else. Bar owners often put cheap booze in expensive bottles to charge more, Bartenders often give drinks away to get good tips without the ownres permission, servers and bartenders alike sometimes trade drinks for drugs or sex, patrons often don’t tip if they don’t feel they’ve been comp’d enough…
I’ve worked in a lot of bars and while some are much, much tighter than others it goes on everywhere.
Charging an additional amount for a charge might also be a method the bar is using to recover the fee paid to credit card companies each time they accept a charge purchase.
NYC’s 8.875% sales tax rate is much higher than the bar’s credit card fees, which are likely no more than 2-3%. Seems implausible they’d offer an 8.875% discount so they can save 2-3% in fees.
Probably the bar is evading collecting sales tax, and perhaps not paying other taxes too. Consider reporting them to the state’s Department of Taxation and Finance.
Around here (upstate NY) the sales tax is added when you add food to an order. So you can sit there and have drinks, whether paying with a card or not, and have no tax. The minute you put a food item on the tab, the whole thing is taxed.
I’ll occasionally close out a drinks tab if I’m going to order food.
Sales tax applies on drinks purchased in a bar, whether or not you order food. So either the bar is covering and paying the sales tax you owe, or it’s cheating. See page 16 of this NY state sales tax booklet (PDF).
It could be that the bars are covering the taxes with the prices on alcohol, but not on the prices of food. I’ll have to ask my friendly neighborhood bar manager. But it is the same in all the bars and restaurants in town.
Might be that we’re paying tax twice on the booze when food gets added to the bill…
Ask the manager, or better yet the NYC dept of revenue. There are several reasons why this could happen and one as was mentioned above that when you order food perhaps a “food and beverage” tax applies. Most all bars and restaurants have computerized systems that are programmed to automatically total up the bill depending on what was ordered. Can you imagine a waitress trying to figure out whether to include or not include tax because you paid cash or credit card? Or whether or not you had food with your drink? Doubtful.
Any establishment that does not abide by the laws risk losing their license, which most owners would surely not want to do.
You would be amazed how many people believe that the rules do not apply to them, that they won’t be audited, or that they’re clever enough to get away with it.
And the government doesn’t usually catch it the next day or even the next year. Owners often think they’re getting away with it for two or three years (or more) until the hammer falls.
Despite what the line on the receipt about the taxable amount might have said, are you absolutely sure the sales tax actually charged came out to 8.875% of the sum of the food price plus the “cash” price of the drink?
Well, no, not 100% sure, and I don’t have the receipt anymore. I’d be surprised if the taxable line was wrong, but just in case, I’ll pay more attention if this happens again.
Seems possible (likely?) to me the sales tax is rolled into the “cash” price of the drinks, and that while an electonic receipt showing total food+drink+tax may not explicitly break out that a “$5” beer is really $4.60 or whatever, the system doesn’t actually double charge you.