Digital Dining and Smart Tax

The Digital Dining POS system is renowned for its feature set which delivers the POS industry's shortest ROI. Smart Tax is just one of those features.

Smart tax is a very simple but effective twist on bar sales tax. In bars, it is common to charge a value added sales tax (VAT) on drinks. VAT tax means that the price of the item purchased at the bar includes sales tax. Typically at the bar, sales tax is added on food items but sales tax is included (VAT) on the drinks.

BAR TAB (Typical)  
Food
$10.00
Drink
$10.00
(net sale is $9.26, $.74 goes to Sales Tax)
Sub Total
$20.00
Sales Tax
$.80
(8% Sales Tax on Food)
Total Due
$20.80

 

Accounting effect  
Net Sales
$19.26
Tax collected
$1.54

Above is a very common bar tab. The Digital Dining POS system however uses an optional feature called Smart Tax. Smart Tax is triggered anytime a bar tab has food. When food is added to a bar tab, Smart Tax will change the drinks from VAT sales tax to additive sales tax. Smart Tax needs no operator intervention. Smart Tax occurs automatically when food is ordered on a bar tab.

BAR TAB (using Smart Tax)
 
Food
$10.00
 
Drink
$10.00
 
Sub Total
$20.00
 
Sales Tax
$1.60
(8% Sales Tax on food & drink)
Total Due
$21.60
 

 

Accounting effect  
Net Sales
$20.00
Tax Collected
$1.60

Smart Tax will put $.74 in your pocket for every $10.00
worth of drinks on bar tabs that have food

The BIG #'s. Consider Smart Tax on an annual basis

Bar Tabs Total
$100,000
 
70 (% with food)
$70,000
(70% of 100K)
70/30 (% of drink vs. food)
$49,000
(70% of 70K)
Reclaimed sales tax
$3,920
(8% of 49K)

We believe these #'s are accurate in our example above.

  • 70% of all bar tabs have food sales
  • 70% of all sales on bar tabs are drinks

Now that you understand the effect of Smart Tax, deciding whether or not to use it is the next step. We suggest using it simply because it puts money in your pocket. Using our #'s above, consider that every $10,000 you do in Bar Tabs, will translate into $392 in your pocket.

Will your customers notice the tax change and get upset?

We have not experienced that. Here are a few assertions regarding the Smart Tax feature

  • Customers that actually examine their tabs are looking for the menu items they ordered; they are not checking the sales tax.
  • It's a given that bar tabs (without food) will generally end in .00 or .50 depending on your drink price structure, but once food is added to a tab, that consistent structure goes out the window due to food pricing and the sales tax being added on just food items.
  • Once a bar tab is started, the likelihood of the customer paying with a credit card increases.
  • Experience tells us that people with tabs spend more than customers spending cash.
  • If using Digital Dining's Smart Tax, you should encourage your bartenders to start a tab for a higher % of their transactions
  • We have asked the NYS sales tax department if the Smart Tax feature violates any NYS sales tax laws and they have responded NO.
  • Smart Tax only changes the sales tax method of drinks, not food. The food is already taxed everywhere in the restaurant.
  • Smart Tax has no effect on dining room drinks. Drinks sold in the restaurant already use the additive sales tax method. Smart Tax only affects the bar. ( as in most restaurants, we are assuming you currently add sales tax to dining room drinks)
  • Smart Tax does not effect "fast" cash sales. If you charge $5 for a drink and the customer pays cash, the total due is $5.
  • If using Digital Dining's Smart Tax, you should take efforts to increase the likelihood of food sales at the bar. (table tents, promos on apps etc.)
  • Team Howard provides a free software utility that allows you to track exactly how many dollars you have gained by using Digital Dining's Smart Tax feature.

If you have the Digital Dining POS system and you are not using the Smart Tax feature,
call Team Howard immediately and we will get it activated asap.