Texas Sales Tax & Restaurants: What’s Taxable?

Running a restaurant in Texas? Then you will need to know how sales tax applies to the food and services you provide. Texas has specific rules about what is taxable and what isn’t regarding restaurants, catering, and food sales. Misunderstanding these rules could lead to compliance issues or lost profits. 

What Food & Beverages Are Taxable?

In Texas, most restaurant sales are subject to sales tax. This includes:

• Dine-In & Takeout Meals – Any prepared food, whether eaten on-site or taken to go, is taxable.
• Soft Drinks & Alcoholic Beverages – All sodas, bottled water, juice with less than 50% real fruit juice, and alcoholic drinks are taxable.
• Snacks & Packaged Foods – If sold in a restaurant or similar setting, items like chips, cookies, and candy are taxable.

Are There Any Exemptions?

Some food and drink items are not subject to sales tax, particularly when sold in specific ways:

• Unprepared Grocery Items – Raw meat, dairy products, fresh fruits and vegetables, and other staple foods are not taxed if sold as groceries.
• Bakery Goods—Customers who purchase six or more bakery items (like donuts or bagels) are tax-exempt.
• Bottled Water (Non-Carbonated) – Regular bottled water is tax-free, but sparkling or flavored water is taxable.

Catering Services

If your restaurant provides catering, these services are taxable. Sales tax applies to:

• Food and drinks served by the caterer
• Delivery and service fees are included in the catering package

Delivery Fees

• If a restaurant requires customers to pay a delivery fee, it is taxable.
• If the delivery fee is optional, it is not subject to sales tax.

Alcohol & Mixed Beverage Taxes

If your restaurant serves alcohol, there are two taxes you must collect:

1. Sales Tax on Alcoholic Beverages – The standard Texas sales tax rate (6.25% state + local rates) applies to beer, wine, and liquor sold for off-premises consumption.
2. Mixed Beverage Tax – Restaurants and bars selling mixed drinks must charge an additional 6.7% tax on those sales, plus a gross receipts tax of 8.25% on the alcohol they purchase.

How to Stay Compliant

1. Register for a Sales Tax Permit – If you own a restaurant in Texas, you must register with the Texas Comptroller’s Office to collect and remit sales tax.
2. Charge the Correct Sales Tax Rate – Texas has a base rate of 6.25%, but local jurisdictions can add up to 2%, making the total rate up to 8.25%.
3. File & Pay Taxes on Time – Depending on your revenue, you may need to file monthly, quarterly, or annually. Late payments can result in penalties and interest.
4. Keep Detailed Records – Maintain invoices and receipts to track taxable and non-taxable sales for accurate reporting.

Understanding Texas sales tax rules for restaurants can help you avoid costly mistakes. Whether you run a small café, a food truck, or a full-service restaurant, ensuring you’re charging and remitting sales tax correctly is essential for smooth operations.

Need more guidance? Consult with one of our sales tax consultants for help.

About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.