Restaurant Tax Guide: How Much Do Restaurants Pay by State?

Restaurant Tax Rates Vary Dramatically

With average profit margins of just 6%, restaurants are especially sensitive to tax burden. The difference between operating in a high-tax vs low-tax state can mean the difference between profitability and closure.

Key Tax Considerations for Restaurants

Sales Tax: Most states charge sales tax on prepared food, ranging from 0% (Oregon, Montana) to over 7% (Tennessee, Mississippi). This directly affects your pricing strategy.

Income Tax: States like Florida and Texas have no personal income tax, meaning restaurant owners keep more of their profits.

Payroll Tax: As labor-intensive businesses, restaurants face significant payroll tax obligations. Some states add additional unemployment insurance costs.

Best States for Restaurants

See our complete restaurant tax comparison across all 50 states to find where your restaurant dollars go furthest.