Smart Tax | How Smart is Your Tax?

Mar 26, 2014 | Restaurant POS, Weekly Articles


How Smart is Your Tax?

That seems like an odd question at first glance, yet it is a very important question. All point-of-sale systems compute the tax due on checks with ease. Heck, even the old cash registers could handle that. So how can tax possibly be smart? If you don’t know the answer yet keep reading, you could be leaving thousands of dollars of revenue on the table!

What is Smart Tax?

Smart Tax, in short, is the ability to change the way tax is computed in real time based on the items ordered on a check. Wait, how does changing the way tax is computed equal more revenue, it is a standard percentage right? Well often times restaurants and bars go hand in hand. Bars that serve food, and restaurants that serve alcohol. And this is where smart tax can really make a difference.

Even though all items are taxable, it is a fairly common practice to include the tax on beer and liquor in the item price. This is called VAT or Value Added Tax. Using VAT tax with a 9% tax rate, a $4.00 beer is actually $3.67 plus the tax of $0.33. Most point-of-sale systems can be configured to compute standard tax for food and VAT tax for alcohol.

How Does Smart Tax Work?

In many instances due to point-of-sale system limitations, standard tax is always charged on top of food prices while VAT tax is always included in the price of all alcohol. Smart Tax allows a point-of-sale system to recalculate and use standard tax on all items when both food and alcohol are present on the same check. This means an extra $0.33 of revenue is generated each time a $4.00 alcoholic beverage is ordered with food.

Don’t worry when using Smart Tax with Restaurant Manager VAT tax can still be used when beer and liquor items are ordered without food.

The Value of Smart Tax

So what does this mean if we take a step back and look at the big picture? While that all depends how much alcohol you sell with food, but in many cases this can mean thousands, yes thousands of dollars of extra revenue each month!

Here is an Example:

Total Sales $100,000
50% of Total Sales were Alcohol $50,000
50% of Alcohol Sales Sold With Food $25,000
Previous Revenue Using VAT Tax at 9% $22,936
Increase In Revue using Smart Tax $2,064


Where to go from here?

The first step is taking a look and your monthly sales and determining what percentage of your alcohol sales are sold with food. Then the value of using Smart Tax can be estimated. If your current point-of-sale system does not support Smart Tax it may be time to consider upgrading to a point-of-sale system that does like Restaurant Manager.

If you are currently using Restaurant Manager you can learn more about about Smart Tax by accessing our Restaurant Manager POS Training Portal or by contacting your system support technician directly.

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