Restaurant taxes in West Palm Beach come from four directions at once, and only one of them is the tax most owners think about. Sales tax runs 6.5% on nearly everything you serve and is due to the Florida Department of Revenue by the 20th of each month. Payroll taxes ride on top of a minimum wage that reached $15.00 on September 30, 2026. Federal income tax lands annually. And the business tax receipts that keep your doors legal renew every September 30, whether anyone reminded you or not.
The money in restaurant tax work is rarely in the filing. It is in three places. The FICA tip credit most owners never claim. The tip reporting rules that decide whether a gratuity is taxable. And the depreciation timing on a build-out, which can move six figures of deduction into the year you need it. Miss those and you pay correctly while paying too much.
Florida Sales Tax on What You Serve
Food served in restaurants is taxable, including takeout. The combined rate in Palm Beach County is 6.5%. That is Florida’s 6% state sales tax plus a 0.5% school capital outlay surtax. The surtax took effect January 1, 2026, when the county’s 1% infrastructure surtax expired.
| Item | Taxable |
|---|---|
| Dine-in meals and beverages | Yes |
| Takeout and delivery orders | Yes |
| Catered events | Yes |
| Mandatory service charges, minimum charges, corkage and setup fees | Yes |
| Complimentary bread, chips, or salsa served with a paid meal | Yes, as part of that sale |
| Meals sold to employees | Yes |
| Meals given to employees at no charge | No, if no cash changes hands and the value is not reportable income |
| Voluntary tips separately itemized, restaurant keeps nothing | No |
| The free meal in a buy-one-get-one promotion | No, tax is due on the purchased meal |
The Gratuity Rule That Drives Audits
A gratuity escapes sales tax only when two conditions are both met. It must be separately itemized on the customer’s receipt, and the restaurant must receive no monetary benefit from it. Both conditions, not either.
An automatic 18% charge added to parties of six is a service charge, and service charges are part of the taxable sales price. A voluntary tip the guest writes on the slip, passed entirely to staff, is not. The moment the house retains any portion of a mandatory charge, the exemption fails on the whole amount.
This is the single most commonly assessed item in a Florida restaurant sales tax audit, because point-of-sale systems frequently code both the same way. Check how your POS categorizes automatic gratuity before an auditor does.
Filing the DR-15
Sales tax returns are due on the 1st of the month and late after the 20th. Our guide to Florida sales tax deadlines and penalties covers the wider filing calendar. If the 20th falls on a weekend or holiday, you file the first business day after.
| Detail | Rule |
|---|---|
| Due date | 1st, late after the 20th of the month following the reporting period |
| Electronic payment cutoff | Confirmation number by 5 p.m. ET the business day before the 20th |
| Mandatory e-filing | Required if you paid $5,000 or more in sales and use tax in the state’s prior fiscal year |
| Collection allowance | 2.5% of the first $1,200 of tax due, maximum $30, only if you file and pay electronically and on time |
| Late penalty | 10% of the tax due, minimum $50 |
That $30 collection allowance is small, but it is free money for filing on time electronically, and the $50 minimum penalty for a late return costs more than the allowance is worth. A restaurant filing monthly forfeits up to $360 a year by being casual about the 20th.
Note the electronic payment cutoff carefully. It is the business day before the 20th, not the 20th. A payment initiated on the 20th can post late.
Payroll Is Where Restaurant Margins Go
Florida’s minimum wage reached $15.00 an hour on September 30, 2026. For tipped employees, the direct cash wage is $11.98, with a $3.02 tip credit. The rate holds flat through 2027, then begins annual inflation adjustments on January 1, 2028, with updated tip credit notices due to employees each January 1 after that.
Two compliance points sit on top of the rate itself.
- The tip credit notice is federally required. You must inform tipped employees of the tip credit arrangement before taking it. No notice, no credit, and the shortfall becomes back wages.
- The credit collapses if tips fall short. If cash wages plus tips do not reach $15.00 for the hours worked, you make up the difference. A slow Tuesday lunch is your exposure, not the server’s.
Tip Reporting Obligations
Employees must report tips to you, and you withhold income tax, Social Security, and Medicare on them. Large food and beverage establishments file Form 8027 annually to report receipts and tips. That generally means more than ten employees on a typical business day. If reported tips fall below 8% of gross receipts, the shortfall can be allocated to staff.
The One Big Beautiful Bill Act created a deduction for qualified tips, capped at $25,000 per return. It phases out at $100 for each $1,000 of modified AGI above $150,000 for single filers, or $300,000 for joint filers. It applies from 2025 through 2028.
Read the next sentence twice, because staff will ask. The deduction reduces federal income tax only. Social Security and Medicare taxes still apply to every dollar of tip income. Nothing about your payroll tax deposits changes.
Your reporting obligation did change. Beginning in 2026, employers report the Treasury Tipped Occupation Code in Box 14b of Form W-2 and qualified tip amounts in Box 12 with code TP. Only tips in occupations on the IRS list of qualifying occupations count, and servers and bartenders are on it. Confirm your payroll provider is populating both boxes, because a W-2 that omits them denies your staff a deduction they are entitled to.
The FICA Tip Credit Most Owners Never Claim
This is the largest single credit available to a full-service restaurant, and it goes unclaimed constantly.
Under section 45B, you claim a credit for the employer’s 7.65% share of Social Security and Medicare tax paid on tips above the amount needed to bring wages to $5.15 an hour. Congress froze that figure at the federal rate in effect on January 1, 2007. The freeze works in your favor. The wage floor tips must cover sits far below what you actually pay.
The computation runs in four steps.
- Total the tips on which you paid FICA tax for the employee.
- Multiply hours worked by $5.15 to get the wage floor.
- If cash wages fall below that floor, reduce the tips by the shortfall. Since Florida’s tipped cash wage of $11.98 far exceeds $5.15, this step usually reduces nothing.
- Multiply the remaining creditable tips by 7.65%.
Example. A server works 1,800 hours, earns $21,564 in cash wages at $11.98, and reports $34,000 in tips. Cash wages exceed the $9,270 floor at $5.15 an hour, so no reduction applies. The credit is $34,000 × 7.65% = $2,601 for that one employee. Fifteen tipped employees at similar volume approaches $39,000 in credit.
Claim it on Form 8846. It is nonrefundable, carries back one year and forward twenty, and depends on having paid FICA on properly reported tips. Under-reported tips shrink the credit, which is the quiet argument for enforcing tip reporting rather than tolerating gaps in it.
Equipment, Build-Outs, and Timing
Kitchen equipment, furniture, and point-of-sale systems are tangible property with a class life under 20 years. That makes them eligible for 100% bonus depreciation when acquired and placed in service after January 19, 2025. Section 179 expensing allows up to $2,560,000 for 2026, with the phase-out beginning at $4,090,000.
Qualified improvement property also qualifies for 100% bonus depreciation. That means interior improvements made to nonresidential real property after the building was first placed in service. For a restaurant that means much of a dining-room renovation can be deducted in the year completed rather than spread across 15 or 39 years.
Two planning notes. Section 179 is limited to taxable income from the active business and cannot create a loss. Bonus depreciation can. And “placed in service” means ready and available for its intended use, not ordered or paid for. Equipment sitting in a crate on December 30 is not placed in service.
Licenses and Local Filings
| Item | Issued by | Renewal |
|---|---|---|
| Business tax receipt | City of West Palm Beach | Tax year Oct 1 to Sep 30, renew Jul 1 to Sep 30, delinquent Oct 1 |
| Business tax receipt | Palm Beach County | Annual, requires city zoning sign-off first |
| Public food service license | Florida DBPR, Division of Hotels and Restaurants | Annual |
| Sales tax certificate | Florida Department of Revenue | Registration, ongoing filings |
| Reemployment tax account | Florida Department of Revenue | Quarterly returns |
The city’s business tax applies to any individual or entity doing business within city limits. Get the city receipt first, then request the zoning sign-off to complete Section 2 of the county application. Certain applicants qualify for fee waivers, subject to conditions. These include those 65 and older, disabled individuals, veterans, and military spouses. Receipts are non-refundable, and penalties begin October 1.
Florida reemployment tax, the state unemployment tax, applies on the first $7,000 of each employee’s wages. It runs through your payroll filings. New employers start at 2.7%. The rate is then recalculated each year on your claims experience, which makes turnover a real tax cost, not just an operational one.
Build the Compliance Calendar Once
- Monthly, by the 20th: DR-15 sales and use tax return, filed and paid electronically
- Each payroll: federal withholding and FICA deposits on your assigned schedule
- Quarterly: Form 941, Florida reemployment tax return, estimated payments if you are a pass-through owner
- Annually, January 31: W-2s to employees with Box 12 code TP and Box 14b occupation code
- Annually: Form 8027 if you are a large food and beverage establishment, Form 8846 for the FICA tip credit
- Annually by September 30: city and county business tax receipt renewals
- April 1: tangible personal property return, Form DR-405, with the county property appraiser
Stop Overpaying on a Correctly Filed Return
Tax USA works with West Palm Beach restaurant owners on the whole stack, not one form at a time. Our certified tax experts, IRS enrolled agents, and CPAs review how your POS codes automatic gratuity before an auditor does, compute and claim the FICA tip credit on Form 8846 including amended returns for open years where it was missed, run payroll with the new Box 12 and Box 14b tip reporting handled correctly, time equipment and build-out purchases so the deduction lands in the year it helps, file DR-15 returns on schedule to keep the collection allowance, and represent owners already facing a Florida sales tax audit or a tip allocation notice. Bookkeeping and restaurant accounting run under the same roof, which is what makes the credit calculations accurate instead of estimated. Call (866) 529-5558 or visit our West Palm Beach office at 1892 Abbey Rd Ste J for a free consultation.
Frequently Asked Questions
What is the sales tax rate for restaurants in West Palm Beach?
6.5%, made up of Florida’s 6% state sales tax and Palm Beach County’s 0.5% school capital outlay surtax. The 0.5% surtax replaced the county’s expiring 1% infrastructure surtax on January 1, 2026.
Are tips taxable for Florida sales tax purposes?
A voluntary tip is exempt only if it is separately itemized on the receipt and the restaurant receives no monetary benefit from it. Mandatory service charges and automatic gratuities are part of the taxable sales price.
What is the FICA tip credit worth to a restaurant?
It refunds the employer’s 7.65% share of Social Security and Medicare tax on reported tips above a $5.15 hourly wage floor. On a server reporting $34,000 in tips, that is roughly $2,601. Claim it on Form 8846.
Does the no tax on tips deduction reduce my payroll taxes?
No. It reduces employees’ federal income tax only, capped at $25,000 per return through 2028. Social Security and Medicare taxes still apply to all tip income, and your deposit obligations are unchanged.
When is the Florida DR-15 sales tax return due?
On the 1st of the month following the reporting period, late after the 20th. If you pay electronically, initiate the payment and get a confirmation number by 5 p.m. ET the business day before the 20th.
What is Florida’s minimum wage for tipped restaurant staff?
Since September 30, 2026, the direct cash wage is $11.98 with a $3.02 tip credit against the $15.00 minimum. If cash wages plus tips fall short of $15.00, the employer makes up the difference.
Can I deduct a restaurant build-out in one year?
Often yes. Qualified improvement property and equipment with a class life under 20 years qualify for 100% bonus depreciation when acquired and placed in service after January 19, 2025. Placed in service means ready for use, not merely purchased.