News & Insights
March 30, 2018
Lots of folks have been asking of late, “Do I have to show taxes in drink prices?”
The Tennessee Department of Revenue recently clarified that including taxes in drink prices is optional. Previously, the state required that menu prices include both liquor by the drink and sales taxes.
The law now gives taxpayers the option to include taxes on the final bill to the customer, instead of in the sales price listed in menus.
Restaurants, hotels and other on-premise establishments can decide whether or not the 15 percent liquor-by-the-drink tax is included in the menu price. The LBD tax may be applied with sales taxes on the receipt. However, if LBD tax is not included in the menu price, there must be a statement on menus that the 15 percent LBD tax is added to the final bill.
For clarity, we agree with Revenue and recommend that the tax statement reference both 15 percent LBD and sales taxes. For example, menus could indicate:
“Menu prices for alcoholic beverages do not include 15 percent liquor by the drink tax and sales tax. Taxes will be added to your final bill.”
As if the topic is not complicated enough, the 15 percent LBD tax does not apply to beer. The law does not have posting requirements for beer, and there is no requirement that an explanation be offered on menus for beer taxes, which are limited to sales tax.
Please keep in mind that price schedules should still contain all taxes, including both liquor by the drink and sales taxes.
See our blog post concerning price schedules here.
The notice clears up a long-standing dispute we have had with Revenue over taxes. We have always thought that Revenue lacks statutory authority to require that taxes be included in drink prices on menus.
There is this pesky American thing about free speech. We love Metallica’s satirical take on freedom in Eye of the Beholder:
Freedom of choice
Choice is made for you, my friend
Freedom of speech
Speech is words that they will bend
Freedom no longer frees you
Doesn’t matter what you see
Or into it what you read
You can do it your own way
If it’s done just how I say
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