Can a restaurant that gives no guest checks or receipts include sales tax in its stated prices instead of adding it separately?

Plain-English summary

Dowd's Beefalo Farms #2 of Laurel Hollow, New York, operates a fast-food restaurant and issues no guest checks or other written receipts. It asked whether sales tax may be included in the total stated sales price when no receipt is issued.

The Department ruled it may — using the "unit price" method, with a required placard.

• Tax Law § 1132(a): if a customer is given a sales slip, invoice, receipt or other memorandum of the price, the tax must be stated separately on the first such document.
• Tax Law § 1133(d): a vendor may not advertise or hold out, directly or indirectly, that the tax is not an element of the price.
• Tax Law § 1144: references to the tax in placards or advertisements must be in a prescribed form (generally "sales and use tax," or just "tax" where the tax is separately stated on a bill under § 1132(a)).
• The "unit price" method: vendors who do not issue sales invoices, guest checks or other written receipts may collect and report the tax by the "unit price" method — the total price rung up on the register (or otherwise recorded) includes the sales tax.
• The placard requirement: because customers must be made aware that tax is included, a business using this method must visibly display a placard telling all customers that the prices of all taxable items include sales tax.

Because Dowd's issues no written receipts, it may use the "unit price" method to collect and report its sales tax.

What this means for you

No receipts? You can build the tax into the price. A restaurant or shop that doesn't hand customers a guest check, invoice or receipt can ring up tax-included prices under the "unit price" method, rather than adding tax as a separate line. The register total is treated as containing the tax, which you then back out and report.

The trade-off is a mandatory, visible placard. Because customers need to know the price already contains tax, this method requires you to post a clearly visible sign stating that the prices of all taxable items include sales tax. That sign is what keeps you on the right side of the rule (§ 1133(d)) against hiding the tax.

If you do give a receipt, the ordinary rule returns. The moment you give the customer a sales slip, invoice or receipt, § 1132(a) requires the tax to be stated separately on it. The "unit price" method is specifically for vendors who issue no such documents.

Common questions

Q: We don't give guest checks — do we have to add tax separately at the register?
A: No. You may use the "unit price" method and include the tax in the stated price. You must, however, visibly post a placard telling customers that the prices of all taxable items include sales tax.

Q: What does the placard have to say?
A: It must tell all customers that the prices of all taxable items include sales tax, so customers are aware the tax is built into the price. New York requires this because a vendor may not hold out that the tax isn't part of the price (§ 1133(d)).

Q: What if we start handing out receipts?
A: Then Tax Law § 1132(a) applies and you must state the tax separately on the receipt (the first such document given to the customer). The tax-included "unit price" method is only for vendors who issue no written receipts.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1132(a) — requires the tax to be stated, charged and shown separately on the first sales slip, invoice, receipt or other memorandum of price given to the customer
• Tax Law § 1133(d) — bars a vendor from advertising or holding out, directly or indirectly, that the tax is not an element of the price
• Tax Law § 1144 — prescribes the form for references to the tax in placards, advertisements and other publications

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_56s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-H-81(56)S
Sales Tax
March 23, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801219A

On December 19, 1980, a Petition for Advisory Opinion was received from
Dowd's Beefalo Farms #2, Route 25A Cold Spring Road, Laurel Hollow, New York
11791.
At issue is whether sales tax may be included in the total stated sales
price when no receipt is issued.
Petitioner is engaged in the business of operating a fast food restaurant.
Petitioner issues no guests check or other written form of receipts.
Section 1132(a) of the Tax Law provides in part that, "If the customer is
given any sales slip, invoice, receipt or other statement or memorandum of the
price, amusement charge or rent paid or payable, the tax shall be stated, charged
and shown separately on the first of such documents given to him."
Section 1133(d) of the Tax Law provides that "No person required to collect
any tax imposed by this article shall advertise or hold out to the public in any
manner, directly or indirectly, that the tax is not considered as an element in
the price, amusement charge or rent payable by customers."
Section 1144 of the Tax Law provides that "Whenever reference is made in
placards or advertisements or in any other publications to any tax imposed by
this article, such reference shall be in substantially the following form: 'sales
and use tax'; except that in any bill, receipt, statement or other evidence or
memorandum of sale....issued or employed by a person required to collect tax, if
the tax is required to be stated separately thereon as provided in subdivision
(a) of section eleven hundred thirty-two, the word 'tax' will suffice."
However, vendors who do not issue sales invoices, guest checks or any other
written forms of receipts may collect and report sales tax under the "unit price"
method. The "unit price" is the total price of the item, including the sales tax,
which is rung up on a cash register or recorded in some other system of
accounting for sales. Since the customer must be made aware of the inclusion of
sales tax in the total sales price, every business establishment employing the
"unit price" method must visibly display, to all customers, a placard stating
that prices of all taxable items include sales tax.
Accordingly, since the petitioner does not issue guest checks or any other
written receipts, the "unit price" method of collecting and reporting sales tax
may be used.

DATED: March 6, 1981

TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR