Because Ohio restaurants don't fall into one of the exempt categories — groceries and prescription drugs — a sales tax rate of 5.5 percent is assessed by the state on prepared food sold for consumption on the premises. Not all prepared food incurs this tax. Exemptions include restaurant employees eating at work as part of a benefit plan. Churches or other charitable organizations and colleges or schools feeding students in a cafeteria setting fall into this category also. Grocery stores get a pass because most of the food they sell is intended to be consumed elsewhere.
The sales tax is a long-practiced means for states to raise money to provide goods and services for their residents. All Ohio restaurants that don't fall into one of the exemption categories are expected to remit sales tax quarterly. Fall behind on payments and you realize how serious the state is about collecting this money due. As of January 2011, the sales tax rate for Ohio is 5.5 percent, according to the website Tax-Rates.org.
Even though the official Ohio sales tax rate is 5.5 percent, local cities, counties and mass transit districts are allowed to levy smaller sales taxes on top of that, though the overall rate can never exceed 8.5 percent. These local taxes are applied at varying rates and intended to serve the same purpose as the larger overall sales tax, namely, to augment a municipality's budget for providing services to the local area.
A successful restaurant owner can expect some level of income tax on his business's profits. The actual rate varies according to applicable tax deductions or the type of business entity the restaurant operates under, but rest assured that either corporate or personal income tax will be collected upon a profitable activity. This aspect of Ohio taxation makes it imperative that restaurant owners receive financial advice from a tax professional.
In an effort to make food more affordable to those on low incomes, the food exception was created, exempting consumable edible products with nutritional value to humans. One class that does not receive a sales tax break is beverages, specifically those sweetened with sugar or corn syrup, and those containing alcohol. Because restaurant food is consumed on the premises, drinks like this are included under the sales tax code as a means of trying to discourage purchase of these allegedly less-healthy products.
