Audit Methodology 101- What is a Credit Card Test of Sales?

The use of a credit card test has become an increasingly popular audit methodology employed by the California Department of Tax and Fee Administration’s (CDTFA) audit staff. It used to be primarily utilized to estimate sales for restaurant and bar establishments but we are finding that the use of this test is becoming more prevalent in other industries as well.

The increased use of this methodology is for good reason. When preformed correctly, the test can produce a very accurate computation of a business’ gross receipts. The key to performing the test correctly, as with others, is making certain that the […]

Restaurants and Caterers Beware – Facility Rental Charges are Generally Subject to Tax

Restaurants commonly make their banquet rooms available for large parties to hold special events such as birthday parties, wedding receptions, and retirement parties. Most restaurants, however, are unaware of the potential sales tax assessment that may accompany the rental charges for these facilities.

A common practice is for the restaurant to offer the rental of its banquet room for a flat fee and then separately offer an abbreviated menu from which its customers choose the meals for their guests. The food and drinks are often served at a price per person under these arrangements.

Restaurants generally understand that food and drinks served […]