Food Service

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From restaurants and cafeterias to food trucks and meal prep services and more, the food service industry makes sure we have the sustenance we want and need. Let the team at StenTam help deliver the tax credits you’re owed.
Behind healthcare, the food service industry was perhaps the entity most impacted by the COVID-19 pandemic. Whereas online food orders increased by approximately 200 percent, total food service industry revenue in the United States dropped by roughly 20-30 percent. And, about 60 percent of the jobs lost during the peak of the pandemic were from this industry.

Most consumers have resumed in-person dining, but disruptions in the supply chain continue to affect food service business operations and profitability. Companies that had to invest in new safety measures and enhanced sanitation practices encounter higher operational costs, even as many of them have innovated their business model to adapt to changing consumer behavior.

The U.S. government in 2020 served businesses in food services and other industries with a payroll tax credit to encourage them to keep their employees on the payroll during the pandemic. Referred to as the Employee Retention Credit (ERC), it was a component of the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The ERC benefits employers in the food services industry by providing them with funds so they don’t have to take on loans or other types of debt just to cover operating expenses. Or, they can further invest in staff to improve service quality, expand facilities and locations and conduct marketing and promotions to attract new customers.

Government Orders

Example:
New York, July 1, 2020 –
On July 1st, Governor Andrew M. Cuomo announced that the reopening of New York City indoor dining, originally part of the city’s expected entry into Phase Three on July 6, will be postponed as states across the country that previously reopened indoor dining are experiencing upticks in COVID-19 cases. The governor also announced that New York State will expand its testing criteria to all New Yorkers statewide. Governor Cuomo also announced that New York State will create an enforcement department to supplement the local enforcement of COVID-19 guidance and restrictions

Find More Government Orders Specific to Your State on Our Insights Page

To learn more about ERC eligibility requirements and how to apply for the tax credit, check out our comprehensive list of FAQs:

For How Long Is the Employee Retention Credit Available?
The Employee Retention Tax Credit expired in September 2021. But, eligible businesses in the food service sector still have time to file paperwork and retroactively receive claims for the ERC in 2023. To do so, they must file a Form 941-X for relevant quarters. For all four quarters in 2020, the deadline to apply is April 15, 2024. For all quarters in 2021, the deadline is April 15, 2025.
How Much Can Eligible Employers in the Food Service Industry Receive through the ERC?
For 2020, the Employee Credit is a credit against certain payroll taxes of 50 percent of the wages paid — up to $10k per employee — from March 12 – December 31, 2020 (capped at $5k per employee). For 2021, the ERC is a quarterly tax credit of 70 percent of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (capped at $7K per employee per quarter).
How Do I Know if My Food Service Business is Eligible for the Employee Retention Tax Credit?
You may be eligible for the ERC if your business operations were fully or partially suspended by governmental COVID-19 orders, thereby limiting commerce, travel or group meetings. That’s not all, though. Your business also might be eligible if it experienced a significant decline in gross receipts during 2020 or within the first three quarters of 2021. New startup businesses that began operations after February 15, 2020, may also qualify, regardless of revenue.

There are two main ways to be eligible for stimulus refunds:

  • If your business matches the required decline in revenue within any quarter of 2020 or 2021.
  • If you have W-2 employees.
What Exactly Is “a Significant Decline in Gross Receipts” Under the Employee Retention Credit Program?
The answer to this question varies from 2020 to 2021. An employer had a significant decline in gross receipts in 2020 during the first calendar quarter if its gross receipts for that quarter were less than 50 percent of those for the same calendar quarter in 2019. An employer had a significant decline in gross receipts in 2021 during the first calendar quarter for its gross receipts for that quarter if they were less than 80 percent of those for the same calendar quarter in 2019.
How Do I Know Which COVID-19 Governmental Orders Were Enacted in the State Where My Legal Business is Located?
We have a list of state-specific COVID-19 orders on the Insights page of our website. Just click on your state to see the applicable orders and restrictions.
How Do I Apply for the Employee Retention Credit?
Business in the legal industry must first determine their eligibility, starting by ensuring they meet IRS qualifications. To retroactively claim the ERC, amend previously submitted Forms 941 by filing and submitting Form 941-X for each qualifying quarter.

We know you have a lot on your plate, so let our experienced team of tax professionals guide you through the ERC application process. Contact us today to learn more!

Qualifying orders (From IRS)

What kind of government orders qualify my business or organization for the ERC? (added July 28, 2023)

To qualify for ERC, you need to have been subject to a qualifying government order related to COVID-19 that caused a full or partial suspension of your trade or business operations. The government order may be at the local, state, or federal level.

Examples of governmental orders:

  • An order from the city’s mayor stating that all non-essential businesses must close for a specified time period;
  • A state’s emergency proclamation that residents must shelter in place for a specified period, except for essential workers;
  • An order from a local official imposing a curfew on residents that impacts the operating hours of your trade or business for a specified time period;
  • An order from a local health department mandating a workplace closure for cleaning and disinfecting.
Can I rely on a recommendation, bulletin or statement issued by a government authority to qualify for ERC? (added July 28, 2023)

No. To qualify for the ERC, you must have been subject to a government order that fully or partially suspended your trade or business.
Recommendations or statements encouraging you to take certain actions are not orders.
If you use a third party to calculate or claim your ERC, you should ask them to give you a copy of the government orders – not a generic narrative about an order. Read the order carefully and make sure it applied to your business or organization.

Is being subject to a government order enough to make me eligible for ERC? (added July 28, 2023)

No. You need to demonstrate that the government order was related to COVID-19 and that it resulted in your trade or business being fully or partially suspended.

What does it mean to be fully or partially suspended? (added July 28, 2023)

Whether your business or organization was fully or partially suspended depends on your specific situation. For examples, see Notice 2021-20, Part III, Section D.

Some examples of who doesn’t qualify under this eligibility factor:

  • If all your employees were able to telework during the pandemic and your business continued to operate, your business wasn’t suspended.
  • If your customers were affected by a stay-at-home order, but no orders applied to your business operations, you weren’t suspended.
  • If you voluntarily closed your business or reduced hours of operation, you weren’t ordered to suspend.

You could still qualify for ERC based on a decline in gross receipts even if you don’t qualify under suspension of operations due to government order.

Was my business or organization fully or partially suspended if I had a supply chain issue? (added July 28, 2023)

A supply chain issue, by itself, does not qualify you for the ERC.

The IRS provided a narrow, limited exception if an employer was not fully or partially suspended but their supplier was. However, it applied only when the employer absolutely could not operate without the supplier’s product and the supplier was fully or partially suspended themselves.

In addition to having the supplier’s governmental order, you will need to show that:

  • The government order caused the supplier to suspend operations,
  • You couldn’t obtain the supplier’s goods or materials elsewhere (regardless of cost), and
  • It caused a full or partial suspension of your business operations.

Why Work With StenTam?

We Have All the Ingredients to Get You the Tax Savings You Deserve.

Rapidly changing demand, supply chain disruptions, workforce shortages and more — you name it, the food service industry has dealt with it. That’s why making the most of available tax credits and incentives can make all the difference in offsetting operational costs and maintaining financial stability.

You already have enough on your plate. Let us use our compliance-focused specialty tax solutions to serve your business.

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