Restaurant sales tax by state: meal rates, service charges and auto-gratuities

A party of eight leaves with an 18% charge on the check, and the next morning your bookkeeper asks whether you should have charged sales tax on it. The answer changes at the state line, and the rules that decide it date from 1994 to October 2026.

Sales tax on a restaurant meal is the state rate plus local taxes, and in some states and cities a separate meals tax: about 7.35% in Connecticut, 8.875% in New York City, 10% in Washington, D.C. A mandatory service charge or auto-gratuity is always taxable in California, Georgia, Minnesota, Rhode Island and Washington. Most other states we checked exempt it only if it is separately stated, called a gratuity and paid in full to staff, and four cap the exemption at 20%. Last checked: 5 November 2026.

How is a restaurant meal taxed in each state?

Three layers stack on a restaurant check: the state's general sales tax, local sales taxes, and in some places a tax aimed at meals or drinks. The state rate is the only one that is the same everywhere in a state.

State rates as of 1 January 2026, from the Iowa Legislative Services Agency's 50-state table (which draws on the Tax Foundation), range from 0% in Alaska, Delaware, Montana, New Hampshire and Oregon to 7.25% in California. The national median is 6%.

These states and cities tax restaurant meals differently from ordinary goods. Each line comes from the state or city revenue department's own published pages, checked on 5 November 2026:

Everywhere else, the restaurant charges the general state rate plus whatever the county, city or district adds. Look up the combined rate for your street address on your state revenue department's lookup, not a ZIP code table: boundaries cut through ZIP codes.

Is a mandatory service charge or auto-gratuity taxable?

This is the question no current table answers, so we built one from each state's rule, ruling or published guidance. "Labeled" means the bill must call it a gratuity or tip, not a service charge.

Massachusetts note: mass.gov blocks automated requests, so we read the Department of Revenue's meals guide from an archive.org copy of 18 June 2026. Local meals taxes can differ from the state rule: Virginia's county meals tax statute copies the 20% exclusion, but a city levying under its own charter may not, so ask the city or county that collects it.

How many restaurants does each answer reach? Our analysis of the BLS Quarterly Census of Employment and Wages for the first quarter of 2026 (NAICS 722511, private full-service restaurants, accessed 5 November 2026): 52,085 of 265,527 full-service restaurants, 19.6%, are in the five states where a mandatory gratuity is always taxable. California accounts for 31,270 of them.

What does the 20% line mean in Texas, Virginia and North Carolina?

All three treat a mandatory gratuity of up to 20% as a tip, but they handle the excess differently. Take a $500 banquet with a 22% charge ($110):

The fix in Texas is simple: keep the charge at 20% or lower. Vermont also draws a 20% line, but its published summary does not say how the excess is taxed.

Who has to receive the money?

The exemption usually depends on who ends up with the charge, and states define the staff differently:

• New York: the entire amount must go to employees. If you use any of it to pay your share of payroll taxes or benefits, all of it is taxable.
• North Carolina: "personnel directly involved in the service". The bulletin lists hosts, maître d's, valets, managers, chefs, bussers and dishwashers as not directly involved. Share an 18% charge 15% to servers and 3% to bussers and the whole charge is taxable.
• Texas: qualified employees who "customarily and regularly" provide the service, which includes busboys, service bartenders and maîtres d'hôtel but not chefs, cashiers or dishwashers. Any share the employer keeps is taxable. Your records must show the payouts, or that those employees' total pay at least equals the charges collected.
• Illinois: staff who prepare, serve, host or clean up the food or drink service, which is wider. Any part used for wages, labor costs or benefits is taxable.

If your service charge funds back-of-house pay or health insurance, it is a service charge, not a gratuity, for sales tax in most of these states. That may be the right business choice; just charge the tax on it. How the money is treated as wages, and how tips may be shared, are covered in our service charge guide and tip pooling guide. How the fee must be shown to guests is in the guide to junk-fee laws.

Worked example: the same party of eight in four states

$480 of food and drink, an 18% charge of $86.40 paid entirely to the servers, and the label on the check as shown. Rates are illustrative combined rates.

In New York the word on the check moves $7.67 of tax. Note the tension there: New York's wage rules presume a "service charge" is a gratuity unless you tell guests otherwise, while the tax rule taxes anything not called a gratuity.

Delivery, cover and other charges

• Delivery charges you bill are taxed with the food in New Jersey (Bulletin S&U-1) and Pennsylvania (61 Pa. Code 60.7).
• Minimum, cover, corkage and setup charges are taxable in Florida (Rule 12A-1.0115(7)(c)) and New Jersey. Colorado exempts a cover charge that is only for entertainment and is separately stated. Minnesota exempts separately stated corkage and coat check fees.
• Card surcharges: see our credit card surcharge guide for whether you may add one; whether it is taxed depends on your state's definition of the sales price.

A sales tax checklist for the auto-gratuity

AUTO-GRATUITY SALES TAX CHECKLIST

[ ] Which state are we in? Find our row in the table above.
[ ] Always-taxable state (CA, GA, MN, RI, WA)? Tax the charge. Stop.
[ ] The check calls it a "gratuity" or "tip", on its own line
    (NY, NJ: required; TX accepts "service charge")
[ ] The charge is disclosed on the menu and the check (NC: required)
[ ] It is 20% or less (TX, VA, NC, VT)
[ ] 100% goes to the staff the state counts (NC: not hosts, bussers,
    chefs; NY: none used for employer payroll costs)
[ ] Payout records kept: date, check, amount, who received it
[ ] Local meals tax checked separately (VA, Chicago, VT local option)
[ ] Rate looked up by street address, not ZIP code
[ ] Rule re-checked every January; save the page with the date

Check with an adviser or your state revenue department for your situation; a written ruling binds the state only for the business that asked for it.

Can TablePort handle this for you?

TablePort adds US sales tax on top of your prices and gives your accountant the numbers to file.

1. Set your sales tax rates, and TablePort adds tax on top of menu prices on every check.
2. At close, reconcile cash, voids, comps and tips on one screen.
3. Use the accounting exports for daily sales, tips and tax, and sync sales to QuickBooks or Xero.

One honest limit: you set the rates. TablePort does not look up your combined rate, decide whether a service charge is taxable in your state or file your return. See the POS page.