Voluntary tips (customer-written) are not taxable in any US state. Mandatory service charges (auto-gratuity for large parties) are part of the check and usually taxable.

Does DoorDash collect sales tax on my restaurant orders?

Yes in all US sales-tax states. DoorDash, Uber Eats, and Grubhub operate as marketplace facilitators and collect + remit sales tax on orders they process.

Is alcohol taxed differently from food?

Alcohol is subject to standard sales tax plus state/local excise taxes. Effective rates can differ — for example, Tennessee imposes a 15% mixed drink tax on top of sales tax.

Do I charge sales tax on gift cards?

No — gift card sales are not taxable. Tax applies when the customer redeems the card to purchase taxable items.

Sales Tax for Restaurants and Food Service

Updated 2026-04-27

How sales tax applies to restaurants, cafes, food trucks, and catering — prepared food rules, tips handling, third-party delivery apps, and state-by-state variations.

Restaurants operate almost entirely within a single state, so economic nexus rarely applies. What matters is getting the per-meal sales tax right: prepared food is taxable in nearly every state (even those that exempt groceries), but the rules on tips, delivery fees, and third-party apps vary significantly.

Prepared food vs groceries

Most US states tax prepared food (anything sold heated, or with utensils, or for immediate consumption) at the full sales tax rate, even when the same state exempts grocery items. A rotisserie chicken is taxable; a raw chicken from the butcher counter usually isn't. If your restaurant sells any take-home groceries alongside prepared meals, you'll need point-of-sale configuration that differentiates them.

Tips and gratuities

Voluntary tips (customer writes in their own amount) are NOT subject to sales tax in any state. Mandatory service charges (automatic gratuity for large parties, banquet minimums) are considered part of the check and ARE taxable in most states. The distinction turns on whether the customer had a choice — if you imposed the fee, it's taxable.

Third-party delivery apps (DoorDash, Uber Eats, Grubhub)

Starting 2020-2022, most states extended their marketplace facilitator laws to cover food delivery platforms. DoorDash, Uber Eats, Grubhub, and similar apps now collect and remit sales tax on the full order total (food + fees) on your behalf. Restaurants reconcile facilitated sales on a separate return line.

Alcohol and specialty items

Alcohol is usually subject to the standard sales tax plus state and local excise taxes. In a few states (including Tennessee's mixed drink tax), alcohol has a different effective rate from food. Soft drinks, candy, and bottled water also have state-specific carve-outs — verify per menu item.

Catering

Catering is generally taxable at the delivery location's rate. Off-site catering can create multi-state compliance obligations if you cater across state lines. Most catering contracts should itemize food, labor, and rental (if any) separately since some states tax labor and rental at different rates.

Compliance checklist

Register for a sales tax permit in each state where you operate.
Configure your POS (Square, Toast, Clover) with correct tax categories: prepared food, groceries, alcohol, non-taxable items.
Separate automatic gratuity from voluntary tips on every check.
Reconcile third-party delivery sales monthly; keep delivery platform reports for audit.
File on your assigned cadence (most restaurants file monthly given sales volume).

Frequently asked questions

Are tips taxable?: Voluntary tips (customer-written) are not taxable in any US state. Mandatory service charges (auto-gratuity for large parties) are part of the check and usually taxable.
Does DoorDash collect sales tax on my restaurant orders?: Yes in all US sales-tax states. DoorDash, Uber Eats, and Grubhub operate as marketplace facilitators and collect + remit sales tax on orders they process.
Is alcohol taxed differently from food?: Alcohol is subject to standard sales tax plus state/local excise taxes. Effective rates can differ — for example, Tennessee imposes a 15% mixed drink tax on top of sales tax.
Do I charge sales tax on gift cards?: No — gift card sales are not taxable. Tax applies when the customer redeems the card to purchase taxable items.