How does a restaurant record sales tax on comped meals?

Question

Someone told me that when a restaurant comps items from your bill, that these items can be recorded as cash discounts so that no tax needs to be paid. I always thought that the restaurant had to pay tax on the cost of these items. Who is right?

Answer 1

State law generally governs this.  Normally they would have to pay the sales tax on any goods purchased for the business and not sold.  Arguably that would include meals given away without charge.  Some states treat this as a "store coupon" and require that tax be collected/paid on the retail price before the discount.