Now is a great time to start planning for the upcoming year, and a good step in that direction is to ensure that you have appropriate checks and balances in place with your supply partners. Once you are comfortable that they are in place, then you and your vendors can concentrate on building and moving the relationship forward through new menu offerings and finding ways to lower costs without affecting quality.
Over the next several months, I will be concentrating my focus in these blogs to showcase different aspects of building these checks and balances into your program. Blogs will cover topics such as supplier contracts, supplier audits, what to do after the contract is in place and how to check products in at the back door.
Let's start out with a relatively easy checkpoint: making sure that the suppliers have sales tax certificates in their system for your restaurants. I must confess that sales tax certificates and the impact that they can have were never even on my radar until about five years ago. I was engaged to perform a broad-line distributor audit on behalf of a client with 10 restaurant locations in Texas and just happened to notice that some of their takeout paper supplies had sales tax assigned on invoices to the customer. I was aware that some of these items were tax exempt in the state of Texas and raised the question with the supplier. We asked the supplier to run a report detailing all takeout paper items for the 10 locations and found that all restaurants were charged sales tax on those products. Based on our findings, two things transpired. First, the supplier sent over sales tax certificates for each location for the restaurant company to sign (and agreed to do so prior to any new openings). And second, the supplier refunded about $7,000 to the restaurant operator for the overcharges. I am fairly certain that the supplier was able to successfully petition the state for reimbursement.
When applying for credit with your distributor (or as a follow up with them), do not forget to ask your rep to present a blanket sales tax certificate to sign. This signed form will ensure that your restaurant is not charged for sales tax on items deemed to be tax-exempt by your state. Make sure to have one on hand for each of your locations. As mentioned above, I am aware that here in Texas, any paper and paper napkins, cutlery kits, cups and other items used to package takeout food are considered exempt. Check with your supplier, state controller's office or their website for a listing of tax-exempt items.