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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.
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?
How Much Can Eligible Employers in the Food Service Industry Receive through the ERC?
How Do I Know if My Food Service Business is Eligible for the Employee Retention Tax Credit?
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?
How Do I Know Which COVID-19 Governmental Orders Were Enacted in the State Where My Legal Business is Located?
How Do I Apply for the Employee Retention Credit?
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.
StenTam can help you discover which tax credits your business qualifies for.
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