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How Restaurant Owners Can Maximize the Upcoming Tax Holiday
George Liakakis : Jul 11, 2023
Massachusetts consumers are already making plans to maximize the upcoming sales tax holiday. Massachusetts business owners should be doing the same—including restaurant owners. Despite not qualifying for the sales tax exemption, restaurants can capitalize on the tax holiday weekend in a number of ways. Consumers out in their communities will be looking to spend money that weekend. Start strategizing now about how you’re going to get them through your doors.
Massachusetts Sales Tax Holiday Background
It has been five years since Governor Baker signed the “Grand Bargain” law, which established Massachusetts’ paid family and medical leave program and made tax-free holidays an annual occurrence. For 2023, the tax holiday is scheduled for the weekend of August 12-13. During that Saturday and Sunday only, shoppers in Massachusetts can skip the 6.25% state sales tax on most retail purchases under $2,500.
The tax holiday does drive a lot of business into stores. Shoppers wait to make big purchases like appliances and electronics. Families plan back-to-school shopping around the tax holiday weekend. From the retailer’s side, the tax holiday generates revenue but also creates extra work and stress. Businesses have to prepare their POS systems and adjust their procedures for reporting and remitting sales tax on any eligible sales made during the tax holiday.
The tax holiday creates a different kind of challenge for restaurants and bars. Meals and alcoholic beverages are on the list of items that aren’t exempt from sales tax (along with vehicles, utilities and marijuana products). It’s certainly convenient that you don’t have to change the way you create customer checks or report sales tax. However, being excluded from the tax holiday means you’ll need to work a little harder to bring in extra business than other retailers.
Here’s How Massachusetts Restaurant Owners Can Maximize the Tax Holiday
- Communicate clearly about the weekend with staff and customers. Hundreds or even thousands of customers might come through your restaurant during the sales tax holiday weekend, and not all of them will be clear on the finer points of the law. Diners who aren’t expecting to be charged sales tax all weekend might be surprised and displeased when the bill comes. Prevent conflict and confusion by making sure everyone’s clear about the tax holiday’s limitations for restaurants. Staff should be briefed, and you may want to post information on your social media pages and at the restaurant’s entrance during the weekend. A simple note explaining that the law doesn’t allow meals and alcohol to be exempt from sales tax should prevent your customers from feeling misled or leaving with a bad impression.
A caveat: if your restaurant sells any merchandise that is typically subject to sales tax (like tote bags or glassware branded with your logo), these products may be eligible for the tax weekend. Share photos of merchandise on social media before the tax holiday to encourage people to come in and save a little money. Releasing new styles of your merchandise that weekend may also bring in the most loyal customers.
- Create a draw to pull in people who are already out shopping. Offering some kind of discount or promotion in the restaurant will appeal to shoppers who are already in money-saving mode. Something like a two-for-one appetizer promotion or a free dessert should pique the interest of hungry diners. Or, use the tax holiday weekend to offer some new cocktail, dessert or menu item and sell it as a one-time-only special for the holiday weekend. Special events like live music, gift basket raffles or outdoor entertainment for kids could also bring in business. Whatever you decide to do, start promoting it on social media by early August so people build you into their tax holiday plans.
- Shop for restaurant supplies. The tax holiday could be an opportune time to buy new kitchen equipment, dining chairs, decor, glassware, electronics and other supplies that would normally be subject to sales tax. Even rental equipment can qualify for the tax holiday as long as the rental period is no more than 30 days and the full rental cost is paid during the tax-free weekend. Online purchases made from Massachusetts retailers during the tax holiday weekend are also eligible for the tax exemption.
Your restaurant could potentially save hundreds of dollars in sales taxes by doing some strategically-timed shopping during the weekend. Just keep all purchases below $2,500, and don’t make rash decisions. Saving $125 in sales tax isn’t worth spending $2,000 on a piece of equipment you don’t truly need or don’t have the budget for. There may be other tax planning considerations involved when buying restaurant equipment, so consult your advisors about any significant purchases you consider making during the tax holiday weekend.
Is Your Restaurant Ready for the 2023 Tax Holiday?
Sachetta’s business consulting team wants to help you meet your business goals, from your specific goals for the upcoming tax holiday to your long-term vision of your business’s future. Restaurants have unique challenges and unique opportunities, and we’re here to advise restaurant owners about both so they feel empowered to make the right decisions. Contact us today.
Georgios Liakakis, CPA, MSA is a Certified Public Accountant and holds a Master’s Degree in Accounting from the University of Massachusetts Lowell. He joined our team in 2016 focusing on both business and individual taxation using his knowledge of the intricacies of small businesses and the restaurant industry to aid clients.