Alcohol Sales Tax Explained — What Every Bar, Café, and Restaurant Must Know to Stay Compliant

Selling alcohol can boost revenue — but it also increases tax complexity. Every state has different rules for alcohol taxation, and one small mistake can result in penalties, fines, or even suspension of your liquor license.

This guide makes alcohol tax simple — and gives bars, cafés, and restaurants the clarity they need to stay compliant.

1. What Is Alcohol Sales Tax?

Alcohol sales tax is applied to the sale of beer, wine, and spirits. It is separate from your state’s regular sales tax and is often higher.

Restaurants and bars must charge the correct tax rate at the point of sale and remit it to the state on time.

2. What Is Excise Tax?

Excise tax is a specific tax on alcohol imposed before it even reaches your restaurant. You're responsible for:

• tracking alcohol purchases

  
  

• documenting volume

  
  

• reporting how much you sold

  
  

Bars and restaurants often miss excise filings — leading to costly penalties.

3. What’s Taxable vs. Non-Taxable?

Most alcohol sales are taxable, but here’s where it gets tricky:

Taxable:

✔ Wine, beer, spirits

✔ Cocktails and mixed drinks

✔ On-premise liquor sales

✔ Bottle sales

Sometimes Non-Taxable (varies!)

❌ Cooking wine

❌ Alcohol used for food preparation

❌ Certain wholesale transactions

A professional bar accounting system ensures correct categorization.

4. Tracking Your Alcohol Inventory Properly

Inventory tracking is essential for tax accuracy.You need to track:

• beginning inventory

  
  

• purchases

  
  

• usage

  
  

• waste

  
  

• comps / spills

  
  

• sales

  
  

Using integrated POS + accounting tools reduces mistakes dramatically.

5. Common Alcohol Tax Mistakes Restaurants Make

These are the most frequent errors we see:

• wrong tax rate applied

  
  

• failure to file monthly tax returns

  
  

• missing excise filings

  
  

• incorrect classification of alcohol vs. food sales

  
  

• poor inventory tracking

  
  

• underreported or overreported usage

  
  

A dedicated restaurant CPA prevents all of these issues.

6. How to Stay Fully Compliant

Follow this simple checklist:

✔ Separate alcohol sales from food sales

Your POS should break these out automatically.

✔ File on time

States require monthly, quarterly, or annual filings.

✔ Keep all invoices

Distributors, breweries, and wholesalers must be documented.

✔ Maintain accurate inventory

Track waste, comps, and shrinkage.

✔ Use a CPA who understands hospitality

General accountants often miss excise details.

Final Thoughts: Alcohol Tax Doesn’t Have to Be Confusing

With the right systems — and the right bar accounting support — alcohol tax becomes simple, accurate, and stress-free.

CPA4Restaurants helps bars, cafés, and restaurants maintain perfect compliance and avoid fines.