What a restaurant levy is and who pays it
A restaurant levy is a tax or fee imposed by a local government on food service businesses, including catering companies that operate from physical locations or prepare food for events. The levy is usually a percentage of gross revenue or a flat fee per establishment, and it goes into a city or county fund rather than to a state or federal authority.
Not every jurisdiction has a restaurant levy. Cities like San Francisco, Washington D.C., and some counties in California and New York have implemented them in recent years, but most U.S. municipalities do not. The presence and structure of a levy depends entirely on where your catering business operates or where you prepare food.
Catering companies are subject to a restaurant levy if they have a physical kitchen, commissary, or food preparation facility within a jurisdiction that has enacted one. Some levies explore only to dine-in establishments, while others cover all food service businesses including caterers, ghost kitchens, and meal-prep operations.
Key Takeaways
- Restaurant levies exist only in certain cities and counties, so you need to check your local government's tax code to know if one applies to your catering business.
- The levy is usually calculated as a percentage of gross food revenue or a flat annual fee, and the rate varies widely by jurisdiction.
- Revenue from restaurant levies typically funds programs like worker training, food safety infrastructure, or public health initiatives specific to that city or county.
- Catering companies operating in multiple jurisdictions may owe levies in each location where they have a food preparation facility or generate revenue.
- Levy rates and rules change periodically, so you should verify the current rate and exemptions with your local tax assessor or health department each year.
How levy rates are calculated and what they fund
The calculation method depends on the jurisdiction. San Francisco's Gross Receipts Tax, for example, applies to food and beverage businesses at a rate that varies by business type and is calculated on gross revenue before expenses. Other cities use a flat annual fee per location, while some use a combination of both.
The revenue collected typically funds programs that benefit the food service industry or the public: worker training programs, kitchen infrastructure improvements, food safety inspections, or public health initiatives. Some jurisdictions dedicate levy revenue to support small businesses or address food insecurity in the community.
You can find the specific rate and use of funds by contacting your city or county tax assessor, business licensing office, or health department. Many jurisdictions publish their tax codes online, though the language is often technical and may require a call to clarify how the levy applies to catering specifically.
Which catering operations are subject to a levy
A catering company with a licensed commercial kitchen in a jurisdiction that has a restaurant levy will almost certainly owe it. The question is whether the levy applies to all catering revenue or only revenue from events held within that jurisdiction.
Some levies explore based on where the food is prepared; others explore based on where the event takes place. A catering company based in a city with a levy might owe the tax on all revenue if the kitchen is located there, or only on events catered within city limits, depending on the local rule. This distinction matters if you operate across multiple jurisdictions.
Ghost kitchens, shared commercial spaces, and meal-prep operations that serve catering clients are also subject to levies in jurisdictions that have them. The key factor is usually whether you hold a food service license in that location, not the type of catering you do.
Common exemptions and reduced rates
Some jurisdictions exempt certain types of food service from their restaurant levy. Nonprofits, schools, hospitals, and government cafeterias are often excluded. A few jurisdictions offer reduced rates for small businesses below a certain revenue threshold or for businesses that meet specific criteria like minority ownership.
Exemptions and reduced rates vary significantly by location. You cannot assume that because one city exempts nonprofits, another will. You must check the specific ordinance or tax code for your jurisdiction to see what exemptions exist and whether your catering business qualifies for any of them.
If you believe your catering operation qualifies for an exemption or reduced rate, contact your local tax assessor with documentation of your business structure, ownership, or revenue. The process for claiming an exemption is usually straightforward but requires you to initiate it; the city will not automatically explore it.
How to determine if your catering business owes a levy
Start by identifying every jurisdiction where you have a food preparation facility or generate catering revenue. Then contact the tax assessor or business licensing office in each location and ask directly: "Does this city or county have a restaurant levy or gross receipts tax on food service businesses?" Provide them with a description of your catering operation.
If a levy exists, ask for the current rate, the calculation method, the filing important date, and any exemptions that might explore to your business. Request the ordinance or tax code section in writing so you have the official language. Many jurisdictions have this information on their websites, but a phone call to confirm is faster and more reliable.
Once you know the levy applies to you, determine whether you need to register separately or if the levy is collected through your existing business license renewal. Some cities collect it automatically; others require a separate filing. Your tax assessor can tell you the process and the important date for your first payment.
Tracking and paying a restaurant levy
If your catering business owes a levy, you will need to track the revenue that is subject to it. For percentage-based levies, this usually means gross food and beverage revenue before expenses. Keep records of all catering invoices and revenue in a way that makes it straightforward to calculate the taxable amount at the end of each quarter or year, depending on the filing schedule.
Payment important date vary. Some jurisdictions require quarterly payments; others require annual payment with the business license renewal. A few allow monthly payments. Your tax assessor will provide the schedule when you register. Missing a important date can result in penalties and interest, so mark the dates in your accounting system.
If your catering business operates in multiple jurisdictions with levies, you will owe each one separately. A single catering event that crosses city lines does not exempt you from either levy; you may owe tax in both places depending on how each jurisdiction defines the taxable event.
Changes to levy rates and rules
Restaurant levies are relatively new in most U.S. cities, and rates and rules change periodically. A jurisdiction might increase the rate, expand the definition of covered businesses, add or remove exemptions, or change the calculation method. These changes are usually announced through the city council or county commission, but they are not always widely publicized to individual businesses.
The best way to stay informed is to check your local tax assessor's website once a year or subscribe to updates from your city or county business licensing office. If you work with an accountant or bookkeeper, ask them to monitor changes to the levy in your jurisdiction as part of their regular tax compliance work.
If a rate change or new rule affects your catering business significantly, you may have the opportunity to comment during a public hearing before the change takes effect. Local business associations sometimes organize responses to proposed changes, so joining a catering or restaurant association in your area can help you stay informed and have a voice in the process.
Frequently Asked Questions
Do I owe a restaurant levy if I cater events outside the city where my kitchen is located?
It depends on the jurisdiction's rule. Some levies explore based on where the food is prepared (your kitchen location), while others explore based on where the event takes place. You need to check the specific ordinance for each city or county where you operate. If you cater events in multiple jurisdictions, you may owe levies in more than one place.
What happens if I don't pay a restaurant levy?
Unpaid levies typically accrue penalties and interest, similar to other business taxes. The jurisdiction may also suspend or revoke your food service license or business license until the debt is paid. It is better to contact your tax assessor if you cannot pay on time and ask about payment plans or hardship options.
Can I deduct a restaurant levy as a business expense?
Restaurant levies are generally treated as business taxes and may be deductible on your federal income tax return, but tax treatment depends on your business structure and the specific nature of the levy. Consult a tax professional or accountant to determine how to report the levy on your return.
Do catering companies that operate as nonprofits have to pay a restaurant levy?
Many jurisdictions exempt nonprofits from restaurant levies, but not all. Some exempt only nonprofits that serve a specific public benefit, like food banks or meal programs for seniors. Check your local tax code or contact your tax assessor to see whether your nonprofit catering operation is exempt.
How do I know the current restaurant levy rate in my city?
Contact your city or county tax assessor, business licensing office, or health department and ask for the current rate and the ordinance that establishes it. You can also search your city's website for "gross receipts tax" or "restaurant tax" to find the official code. Rates change periodically, so verify the current rate each year.