What are the multi-state sales tax implications for a restaurant chain operating in different states?
The Work Opportunity Tax Credit (WOTC) is a federal tax credit designed to encourage employers to hire individuals from certain groups that have historically faced barriers to employment.
For restaurant and hospitality employers, the credit can be especially relevant because the industry often hires frequently, has seasonal staffing needs, and employs a broad mix of full-time, part-time, entry-level, and hourly workers.
At its core, the credit rewards qualifying employers for hiring eligible new employees from designated target groups. These may include qualified veterans, certain SNAP recipients, long-term unemployment recipients, qualified former felons, Supplemental Security Income recipients, vocational rehabilitation referrals, designated community residents, summer youth employees, and certain individuals receiving family assistance.
For restaurants, hotels, clubs, catering businesses, entertainment venues, and other hospitality employers, the opportunity is often hiding in plain sight. A business may already be hiring individuals who qualify, but if the screening and certification process is not completed on time, the credit can be missed.
Restaurant and hospitality businesses often operate with tight margins. Labor costs, training, food costs, rent, insurance, and supply chain pressures can quickly squeeze profitability. Tax credits do not solve staffing challenges by themselves, but they can help offset some of the cost of hiring and onboarding eligible employees.
The credit may apply across many common roles, including servers, hosts, cooks, bartenders, dishwashers, housekeepers, front desk staff, banquet staff, maintenance employees, delivery workers, and managers, depending on the employee’s eligibility and the employer’s documentation.
A Quick-service restaurant with frequent hiring may have a large number of opportunities to screen new hires. A hotel or hospitality group with seasonal spikes may also benefit from building the screening process directly into hiring and onboarding.
This is one reason the WOTC for hospitality industry can be meaningful. Many employers cannot determine eligibility simply by looking at an applicant’s resume. The process has to be built into hiring, consistently and respectfully.
To claim the credit, employers generally must pre-screen the applicant and request certification from the appropriate state workforce agency. Historically, employers used WOTC form 8850 as part of this process, along with additional Department of Labor forms when required. Timing is critical because certification requests have generally needed to be submitted shortly after the employee begins work.
Employers should also remember that the WOTC is subject to several limitations. The credit generally cannot be claimed for wages paid to certain related individuals, dependents, or rehired employees, and it applies only to an employee’s first year of employment. In addition, eligible employees must work at least 120 hours before any credit can be claimed, with a larger credit potentially available for employees who work more hours. Employers must also reduce their wage deduction by the amount of any WOTC claimed, preventing a double tax benefit on the same wages.
The most practical step is to make the WOTC program part of the normal hiring workflow. That means screening applicants at the right point in the hiring process, tracking submission deadlines, maintaining certification records, and coordinating with payroll and tax advisors before filing.
Employers should also revisit their broader tax position, especially as recent legislation, including the One Big Beautiful Bill Act, continues to affect planning conversations for businesses and owners.
For restaurant and hospitality employers, the credit is not about changing who they hire. It is about recognizing when ordinary hiring activity may already create a tax benefit, then documenting it properly before the opportunity disappears.
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 Timothy Watt, partner in charge of Bennett Thrasher’s Hospitality practice, or call us at 770.396.2200.
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