Choosing a CPA for a Restaurant in Houston

Key Takeaways

• Ask any CPA how they book a daily sales entry from your POS. A vague answer means they have not done restaurant work.

• Tips are wages. The cash wage for a tipped worker can drop to $2.13 an hour with a tip credit, and the paperwork around that trips up a lot of firms.

• Prepared food inside Houston is taxed at 8.25%. If you pour liquor, you also owe a 6.7% mixed beverage gross receipts tax on top.

• Payroll is the highest risk item in a restaurant. Withheld tax is trust fund money and the IRS can come after you personally.

• Monthly numbers are too slow for a kitchen. You want weekly food and labor cost, which is your prime cost.

• Get a flat monthly fee in writing, with your POS and payroll systems named in the agreement.

Why Restaurant Books Are Not Like Other Small Business Books

Most small businesses send an invoice and wait to get paid. A restaurant does not work that way. You take in hundreds of small payments a day. Cash, cards, gift cards, delivery apps, and tips all land in different buckets. The money leaves just as fast for food, labor, rent, and tax.

So the books have to be built off your point of sale system. Not off a shoebox of receipts. A CPA who has never mapped a daily sales summary into the ledger will book your bank deposits as your sales. Deposits come in net of card fees, app fees, and holds. Your sales look smaller than they were, and your sales tax return stops matching what you actually rang up.

Most of the common bookkeeping mistakes in a restaurant start right there, at the daily entry. Fix that one thing and half the year end mess never happens.

• Sales arrive daily, in small pieces, from four or five payment channels

• Tips run through payroll, not just the register

• Food and labor eat most of every dollar that comes in

• Delivery apps pay out days later, minus a fee you have to book

The Tip Rules Your CPA Has To Know Cold

Tips are the part of restaurant payroll that goes wrong most often. Any employee who takes in $20 or more in tips in a month has to report those tips to you. You then withhold income tax, Social Security, and Medicare on that money.

In Texas you can pay a tipped worker as little as $2.13 an hour in cash wages. The tip credit covers the rest up to $7.25. If a server has a slow shift and tips do not get them there, you pay the difference. Nobody tracks that by memory. It has to come out of the payroll system, every period.

There is money on the other side of this too. Employers can claim the FICA tip credit on Form 8846. It gives back part of the payroll tax you paid on your staff's tips. A lot of owners have never heard of it because nobody filed it for them. Ask about it in the first call.

• Ask if they file Form 8846 for the FICA tip credit

• Ask if you are large enough to file Form 8027 each year

• Ask how tip pooling is handled, since owners and managers cannot keep a share

• Ask how credit card tips get from the POS into the paycheck

Sales Tax in Houston Is Not One Simple Rate

Prepared food inside Houston is taxed at 8.25%. That is 6.25% for the state and 2% local. Most of the metro sits at 8.25% too, since that is the state cap, but the rate follows the address and not the mailing city. Check your exact location before you set the rate in your POS.

Not everything on your menu is taxable the same way. Bakery items sold without a plate or utensils get treated differently from the same item served at a table with a fork. Bottled water and some grocery style items are not taxed. If you run a bakery counter next to a dining room, that split has to be set up right in the register or every return after it is wrong.

Alcohol adds another layer. A mixed beverage permit brings a 6.7% gross receipts tax that you owe, plus an 8.25% mixed beverage sales tax you collect. Those are separate filings with separate deadlines. There is also the Texas franchise tax report, due in May, which has nothing to do with sales tax and still catches people off guard.

Payroll Is Where Restaurants Get Hurt

When a slow month hits, payroll tax is the easiest bill to skip. The staff still gets paid. Nobody calls you the next morning. That is what makes it dangerous.

Late deposit penalties step up the longer you wait, and interest runs on top. Before you decide to float it for a few weeks, look at what payroll tax penalties actually cost. It is the most expensive money a restaurant will ever borrow.

The bigger risk is personal. The tax you withhold from your staff's checks is not your money. It is trust fund money you are holding for them. The IRS can assess it against you personally even if you run an LLC or a corporation. That is the trust fund recovery penalty, and closing the restaurant does not make it go away. Any CPA you hire should be watching your deposit schedule like it is the fire suppression system.

Cash Flow When the Margin Is Thin

A monthly close tells you what happened five weeks ago. In a kitchen that is old news. The number that runs the place is prime cost, which is your food cost plus your labor cost as a share of sales. Watch it weekly. If it jumps three points, you want to know Tuesday, while you can still change the schedule and the order.

Houston has its own rhythm and your CPA should plan around it. Rodeo weeks are strong. Crawfish season pulls a crowd in the spring. August heat empties the patio. Hurricane season can shut you for three days and spoil a walk in full of product. A firm that only looks at your books once a quarter will never see any of that coming.

One habit that saves owners: move the sales tax you collect into a separate account the same week you collect it. That money was never yours. Restaurants that keep it in the operating account end up spending it on a compressor in July and scrambling by the 20th.

• Track prime cost weekly, not monthly

• Park sales tax in its own account the week you collect it

• Book delivery app fees as an expense, not as lower sales

• Many operators use four week periods so every period has the same number of Fridays

Which Setup Fits Your Restaurant

There is no single right answer here. It depends on your size, your bar, and how much of the paperwork you want to touch. Most owners first ask whether they need a CPA or just a bookkeeper, and for a single location the honest answer is often both, in different roles.

Language belongs on that list too. Plenty of Houston kitchens are run by a family that talks through the numbers in Vietnamese, Spanish, or Mandarin, and a firm that only works in English turns every question into a two day round trip. If the owner, the manager, and the person doing the ordering are not all comfortable in English, look for a CPA for a Vietnamese owned business in Houston, or whichever language your kitchen actually runs in. Family run restaurants decide things at the table. The accountant needs to be in that conversation, not reading a summary of it a week later.

• Choose a bookkeeper plus a tax season CPA if you run one location, keep a small crew, and already use a payroll service that files your returns.

• Choose a CPA firm that already works with restaurants if you pour liquor, run more than one location, or have a notice from the IRS or the Comptroller on your desk.

• Choose a full outsourced accounting team if you plan to open a second or third door in the next year and want clean numbers a lender will accept.

• Choose an enrolled agent instead if your only real need is representation on a back tax problem and your books are already in good shape.

What To Ask Before You Sign

Take one week of daily POS reports to the first meeting. Ask them to walk you through how those numbers would hit the books. You will learn more in ten minutes than from any brochure.

Then get the money part straight. You want a flat monthly fee in writing so a quick phone call does not turn into a surprise bill. If they only quote you for the return, ask separately about what tax prep costs for a Houston small business and about whether an in-house bookkeeper or an outsourced CPA fits your volume better.

• Which POS and payroll systems have you worked in before?

• Who does the work, you or a staff member I have not met?

• How fast do you answer when the Comptroller sends a letter?

• What do I get every week, and what do I get every month?

• Do you file the mixed beverage returns, or do I?

• Is the fee flat, and what falls outside it?

Frequently Asked Questions

What should a Houston restaurant owner look for in a CPA?

Look for someone who has closed the books for a restaurant before. Ask them to name the point of sale systems they have worked in. Ask how they book a daily sales entry, how they handle tip reporting, and how they file Texas sales tax. Ask what you get every week, not only at tax time. A CPA who shows up in March is a tax preparer for your restaurant, not an advisor. You also want a flat monthly fee in writing so one phone call does not turn into a bill. And you want someone who will talk to your general manager, not only to you. The person running the schedule sees a labor problem first.

Does my CPA need to know my POS system?

Yes. Your point of sale system is the source of your sales numbers. It holds gross sales, comps, voids, discounts, taxable and non taxable sales, tips, and payment types. If your CPA cannot read that report, they will book your bank deposits as sales instead. Deposits come in net of card fees, delivery fees, and holds, so your sales will look lower than they were and your sales tax return will not tie out. That is the kind of gap that pulls a letter from the Texas Comptroller. Before you hire anyone, send over one week of daily reports and ask how they would enter them. The answer tells you most of what you need to know.

How are restaurant tips taxed in Texas?

Tips are wages. Any employee who takes in $20 or more in tips in a month has to report them to you, and you withhold income tax, Social Security, and Medicare on that amount. In Texas the cash wage for a tipped employee can go as low as $2.13 an hour, with the tip credit making up the rest to reach $7.25. If tips fall short, you pay the difference. Larger restaurants also file Form 8027 each year and may have to allocate tips. On the employer side, you can claim the FICA tip credit on Form 8846, which returns part of the payroll tax you paid on tips. Ask your CPA whether they have been filing it.

What sales tax rate do Houston restaurants charge?

Inside Houston, prepared food is taxed at 8.25%. That is 6.25% for the state plus 2% local. Most of the metro also sits at 8.25%, since that is the highest combined rate Texas allows, but the rate follows your street address and not your mailing city. Confirm your location with the Comptroller's rate lookup before you set it in the register. Not everything you sell is taxable. Bakery items sold without a plate or utensils are treated differently from a plated dessert, and some bottled and grocery style items are not taxed at all. Most restaurants file monthly, and the return is due on the 20th. File on time and you keep a small discount for timely filing.

Do I owe extra tax if I serve alcohol?

Yes. Alcohol carries its own tax on top of regular sales tax. If you hold a mixed beverage permit, Texas charges a mixed beverage gross receipts tax of 6.7% on your alcohol sales. That one is on you, not your customer, and you cannot add it as a line on the ticket. There is also a mixed beverage sales tax of 8.25% that you collect from the customer. Beer and wine only permits work differently. These filings are separate from your regular sales tax return and they carry their own deadlines. If the CPA you are interviewing has never filed a mixed beverage return, that is a real gap for a restaurant with a bar program.

How often should a restaurant close its books?

Monthly closing is standard for most small businesses. A restaurant needs more. Food and labor move week to week, so the useful number is weekly prime cost, which is food cost plus labor cost as a share of sales. If prime cost jumps three points, you want to know on Tuesday, not five weeks later. Many operators also run four week periods instead of calendar months, so each period holds the same number of Fridays and Saturdays and one period can be compared to the next. Set it up so the weekly number pulls from your systems with almost no typing. Use the monthly close for tax, accruals, and the story behind the trend.

What happens if I fall behind on payroll taxes?

Move on it fast. Payroll tax debt is the most expensive money a restaurant can borrow. Late deposit penalties climb the longer you wait, and interest runs on top of them. The larger risk is personal. The portion withheld from your employees' pay is trust fund money, and the IRS can assess it against you personally even if the restaurant is an LLC or a corporation. That is the trust fund recovery penalty, and a business bankruptcy does not clear it. If you are behind, file the returns anyway. Filing without full payment is treated far better than not filing. Then get a CPA or an enrolled agent to set up an agreement before collection starts.

Do I need a CPA, or is a bookkeeper enough for one location?

For a single location with simple payroll, a good bookkeeper plus a CPA at tax time can work fine. The bookkeeper keeps the daily entries clean and reconciles the accounts. The CPA files the return and answers the bigger questions. That setup starts to break when you add a bar, a second location, more staff, or a notice from the IRS or the Comptroller. At that point you want one firm seeing payroll, sales tax, and the return together, because the mistakes usually show up where those three meet. A bookkeeper also cannot represent you in front of the IRS. A CPA or an enrolled agent can. That difference matters more than most owners expect.

Talk to a Houston CPA

Nguyen Accounting Group serves Houston small businesses with proactive tax planning, tax resolution, and bookkeeping. See how our tax advisory services and bookkeeping and QuickBooks support work, or book a free 30-minute consult to see if we are the right fit.