Help with Calculating Use Tax and Sales Tax

Hello all,

I just started my pizzeria about 2 months ago and am still trying to learn the ropes of owning my own business.

Can you guys tell me how you calculate your use tax and sales tax and whats the difference ?? I was told by another pizzeria owner that cold items such as sandwiches does not need to be taxed while hot items such as pizza does. I’m completely confuse…???

Please explain…oh I’m in the Bay area CA.


My recommendation is to contact an accountant in your area for consultation. You might also find assistance with the SCORE in your area, or even a friendly restaurant owner you know. Chamber of Commerce is possible another resource.

I would offer advise, but it may be incorrect, or invalid for your state and area. In GA, we tax any food product that we prepare and sell . . . sales tax.

sales tax is the tax that you collect on goods sold and use tax is the unpaid taxes for items that you purchase but have not paid tax on yet, for example if you purchase a bunch of supplies at a sams club like food and cleaning supplies, and use your tax exempt form to purchase those goods, you still owe a use tax on the cleaning supplies because they aren’t exempt. personally what i do is pay the tax when i purchase items like that so i never have a use tax due.

Thanks GT and Nick !!!

This is how it is in Arizona, and most states are likely the same: Items purchased for direct resale and for production of products for resale can and should be purchased tax-exempt. Sales tax or use tax is paid on items you purchase for use in your business.

Examples - Purchased for production and are tax-exempt
Pizza ingredients
Sandwich bread
Styrofoam to-go containers

Examples - Purchased for business use and are taxable (sales or use tax)
Crew uniform shirts

What about these items?
Napkins and plastic utensils
Table linen
Paper or plastic bags

Most of the resale/production and business use decisions are simple, but a few are tricky. It is important to be sure about these decisions because a few years down the road you can end up owing lots of money you didn’t expect to need to pay.

In Arizona, you report use tax payments on the same form used to report sales tax collected on retail sales. Last year we received a letter from the Arizona Department of Revenue asking for a report of things we purchased out of state or over the Internet during the previous four years for which we did not pay sales tax. They kept after us until they got the report and we paid the use tax we owed. Use tax audits happen during sales tax audits in Arizona. We weren’t audited, but this tax issue came as a surprise anyway.

thanks Jeff !!!