How should a restaurant group structure ownership across multiple locations to minimize taxes?
A restaurant chain operating across multiple states faces a layered set of sales and use tax issues. The core rule is straightforward: each state can require collection and remittance once the chain has sufficient connection to that state, but the practical application varies materially by jurisdiction.
After Wayfair, physical presence is no longer required; economic thresholds based on sales dollars and, in some states, transaction counts can create collection obligations even for remote sellers.
For a restaurant group, nexus usually arises through obvious in-state activity: owned locations, employees, inventory, or delivery operations. But remote activity also matters. As of 2026, most sales-tax states impose economic nexus once a seller exceeds a stated sales threshold, commonly $100,000, though some states use higher thresholds such as $250,000 or $500,000, and some still include transaction-count tests. That means a chain selling gift cards, catering, branded merchandise, meal kits, or direct-to-consumer products across state lines may trigger multi state sales tax obligations even before opening a physical location.
The threshold calculation itself is not uniform. Some states measure gross sales, others retail sales, and others taxable sales; measurement periods also differ, using prior calendar year, current year, rolling 12-month periods, or quarterly testing. A chain therefore cannot assume one national rule for state tax nexus.
Restaurant sales tax turns on what is sold, how it is sold, and who is treated as the seller. Prepared food and beverages are generally taxable, including alcoholic beverages, whether consumed on premises or taken out, as illustrated by New Jersey guidance. Illinois similarly treats the seller as responsible for collecting and remitting the applicable tax on its sales.
Important variations include:
These differences are why restaurant sales tax by state must be reviewed transaction by transaction rather than by broad category.
If a chain sells through third-party delivery apps, marketplace facilitator rules become critical. In most sales-tax states, once the platform qualifies as a marketplace facilitator and meets nexus thresholds, the platform generally collects and remits tax on facilitated sales, while the restaurant remains responsible for direct sales such as in-store purchases or orders through its own website. This creates risk of duplicate reporting if both the platform and restaurant remit tax on the same transaction, and exposure if neither does during transition periods. Some states also impose separate retail delivery fees.
For a restaurant chain, multi-state sales tax compliancerequires tracking nexus thresholds, taxability rules, local taxes, marketplace reporting, exemption documentation, and audit support across jurisdictions. Those are classic State and Local Tax Challenges, especially because audits often review periods years after the transaction date and states may scrutinize exemption certificates and reporting methodology.
In conclusion, a multistate restaurant chain must analyze nexus, taxability, sourcing, marketplace collection, fees, and exemptions separately in each jurisdiction. The legal principles are broadly similar, but the operational rules differ enough that a state-by-state review is essential to determine who must collect, what is taxable, and how to report it correctly. As states continue to respond to evolving tax laws and potential implications of the One Big Beautiful Bill Act, consulting with experienced SALT professionals can help restaurants navigate changing requirements and reduce multistate compliance risk.
For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Cory Bennett, partner in charge of Bennett Thrasher’s Hospitality practice, or call us at 770.396.2200.
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