Tax Planning for Restaurants, Breweries, and Wineries: FICA Tip Credit, Inventory Accounting, and Equipment Depreciation

The food and beverage industry is one of the most tax-intensive sectors for small business owners, combining high labor costs, tight margins, significant capital expenditures on buildouts and equipment, and (for alcohol producers) federal and state excise taxes. The most underutilized tax benefit in the restaurant industry is the FICA tip credit under IRC 45B, which gives employers a general business credit equal to the employer’s share of FICA (7.65%) paid on tips that exceed the amount needed to bring tipped employees to the federal minimum wage. Since most tipped employees earn well above the minimum wage in tips, the credit applies to the bulk of their tip income. For breweries and wineries, the permanently reduced federal excise tax rates under the Craft Beverage Modernization Act (originally enacted in 2017, made permanent by the Consolidated Appropriations Act of 2021) represent a significant cost reduction, but these businesses must also navigate complex inventory accounting for raw materials, work-in-process (fermenting beer, aging wine), and finished goods.

How do food and beverage businesses minimize taxes?

What should breweries and restaurants recheck for 2026?

Staff meals are the item to recheck. For amounts paid after December 31, 2025, a business can’t deduct meals furnished to employees for the employer’s convenience or the cost of running an on-premises eating facility for them. If you run a restaurant, staff meals made from the food you sell to customers stay 100% deductible in 2026. Check how your staff meals are set up before deducting them for 2026.

• Business meals with suppliers or distributors are 50% deductible. The temporary 100% restaurant-meal rule ended after 2022.
• Federal and state excise taxes a brewery or winery pays are deductible when they’re ordinary and necessary. Fuel taxes on delivery vehicles are usually part of the fuel cost.
• Liquor license fees are deductible regulatory fees.

How do multi-unit franchise owners handle taxes across locations?

Each location’s income and expenses should be tracked separately for management purposes, but all units typically flow through the same entity and tax return. If locations are in different states, you may owe state income tax in each state where you have nexus, requiring separate state returns and apportionment calculations. Sales tax obligations are location-specific: you register, collect, and remit in each jurisdiction where you operate. Multi-unit owners often benefit from cost segregation studies on each location’s build-out to accelerate depreciation deductions. Consider whether a holding company structure (parent LLC owning separate LLCs for each location) provides better liability protection and operational flexibility.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.