Changing the Mixed Beverage Tax to a Sales Tax

The Texas Restaurant Association plans to seek legislation in the upcoming Legislative Session to change the mixed beverage tax to a sales tax. In the last session, we passed a bill allowing for the disclosure of the 14% mixed beverage tax on a customer's receipt. While tax transparency is important, we'd like to change the incident of the tax from the seller to the purchaser to more closely follow our existing sales tax structure.

A mixed beverage permit allows operators to offer a wider variety of products to their customers, but comes with a higher permit fee and a 14% tax on the establishment’s gross receipts from alcohol sales. The tax results in additional burdens, as gross receipts (including the tax) are included in calculating the franchise tax paid by the business. This puts restaurants in the position of paying franchise tax on the gross receipts tax. Additionally, gross receipts (including the tax) are often included when assessing rent and insurance premiums. Changing to a sales tax would alleviate the double taxation and other burdens.

While the tax rates will continue to differ, this change would allow equal menu pricing between restaurants with a beer and wine permit and those with a mixed beverage permit, since the tax will be added after the sale.