The Alliance of Alcohol Industry Attorneys & Consultants is a select organization of alcoholic beverage licensing and compliance professionals.
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The tax man cometh -- and he's thirsty


The tax man cometh -- and he's thirsty

Mar 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.

A copy of the notice from Revenue is included here.

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:

Independence limited

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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