Why There's Sales Tax on Some Drinks and Not Others

I need a better filing system.
I need a better filing system.

Every once in a while someone mistakes Scott for a food financial expert and risks ruining dinner by trusting him to answer to a burning question. Got a question about food or restaurants? Send it via Twitter @scottreitz, Facebook @ Cityofate or in the comments.

This question came in by email. A disgruntled reader was unhappy that some restaurants were charging tax on his drinks and others were not:

In almost all restaurants that I go to, sales tax is not charged on alcohol. Two places recently have charged it. It this against Texas law?

I thumbed through some of my receipts to see if I saw the same discrepancy. Anyone who has seen my office can attest that I have more receipts than an accountant in high tax season. It didn't take long to find two receipts that calculated tax differently.

A Cane Rosso receipt with five beers and two pizzas added up to $51, and an 8.25 percent sales tax ($4.21) was levied on that entire sub-total.

A receipt from Eno's with seven beers and two sandwiches added up to $47.25, but here the tax was only applied to the food portion of the bill. The restaurant appeared to charge $1.07 in tax, but that's not really how things work.

R.J. DeSilva, a spokesman for the Texas Comptroller, explained the variation. Sales tax depends on whether a restaurant has a mixed-beverage permit from the TABC. If the restaurant does, there is no sales tax -- the business pays a mixed beverage tax on its overall alcohol sales. If they don't have a mixed beverage permit, sales tax is charged on each drink the restaurant sells.

So it's not that a customer isn't being taxed when a restaurant has a mixed beverage permit. It's just that they don't see it. The tax is rolled up into the cost of each drink, instead of being tacked on at the end. The rates are different, though. Sales tax hovers around 8.25 percent, depending on where you're imbibing. The current mixed beverage tax rate is 14 percent.

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