Toast sales tax setup guide: How to add tax on Toast

How do restaurants pay sales tax with Toast POS?

Toast gives restaurants tools to configure tax rates, apply taxes to menus and items, and review sales tax reporting. For restaurants, cafes, bars, and other food service businesses, those settings can support sales tax collection across dine-in, takeout, delivery, and item-specific scenarios. However, Toast does not automatically pay and file sales tax on your behalf.

Toast sales tax setup is only one part of the process. Businesses are still responsible for confirming which taxes apply, keeping tax settings current, setting aside collected tax funds, and filing and paying sales tax on time unless they use an additional solution to help manage those steps.

Here’s how Toast sales tax works, how to set up sales tax rate in Toast, and how DAVO by Avalara can help after sales tax is collected.

How does Toast sales tax work?

Toast POS allows restaurants to customize tax rates and adjust tax settings for specific menus, items, and dining options. Depending on how a restaurant is configured, Toast can support tax settings for dine-in orders, takeout, delivery, menu-specific tax rates, item-specific tax rates, and tax-included pricing.

Before setting sales tax on Toast POS, businesses should confirm which rates and rules apply to their restaurant. Sales tax varies by state, and local rates, menu item taxability, takeout rules, delivery rules, and special district taxes may also affect how tax should be collected.

Toast’s tax tools can help apply the rates and options a restaurant configures in the POS, but the business remains responsible for knowing which taxes apply to its transactions and for handling sales tax filing and remittance.

How to add tax on Toast

To add a sales tax rate in Toast, start in Toast Web. These steps are based on Toast’s tax rate setup workflow:

1. In Toast Web, go to Menus > Settings > Manage tax rates.
2. On the Tax Rates setup page, review your existing tax rates or create a new one.
3. Select + Add Tax Rate to add a new tax.
4. Name the tax, choose the tax type, and enter the rate.
5. Review any applicable tax options, such as takeout tax settings or rounding settings.
6. Save and publish your changes.

Toast notes that selecting the Default? option attaches that tax rate to newly created menus and menu items. Any tax rate changes that are updated and saved will publish automatically to POS devices.

Restaurants should verify tax rates with their state or local tax authority before entering or updating them in Toast. If you operate in more than one location, review the correct tax setup for each restaurant, especially if rates or rules vary by city, county, state, or dining option.

How to apply Toast sales tax settings to menus

Toast also allows restaurants to adjust tax settings at the menu level. This can be useful when different menus need different tax treatment or when a restaurant needs to manage tax-included pricing.

To access menu-specific tax settings:

1. In Toast Web, go to Menus > Bulk management > Advanced properties.
2. Select the menu you want to edit.
3. Find the Taxes section.
4. Choose whether the menu should inherit tax rates from the restaurant.
5. Review the tax inclusion and dining option tax settings.
6. Save and publish your changes.

Toast’s tax inclusion options include Tax Not Included, where tax is added to the item price, and Tax Included, where the item’s displayed price already includes tax. For some U.S. restaurants, Toast also offers Smart Tax, which can allow a menu item’s price to include tax in one section of the restaurant and exclude tax in another.

How to apply Toast sales tax to takeout and delivery

Toast includes dining option tax settings that can affect how tax applies to dine-in, takeout, and delivery orders. For example, the No Effect setting means the item has no dining option-specific tax exemption, so Toast adds tax to dine-in, takeout, and delivery orders. The No Tax for Takeout and Delivery setting makes the item tax-exempt when served for takeout and delivery.

Toast also includes a takeout tax option. Some states may require an alternative tax rate for takeout items, so restaurants can enable a separate takeout tax rate when applicable.

Restaurants should be careful when configuring these settings. Toast notes that the Dining Option Tax setting is not supported when combined with a takeout tax rate. If a restaurant uses a takeout tax rate, the menu items in question should have the Dining Option Effect set to No Effect.

Delivery can make sales tax more complicated because taxability may depend on the restaurant’s location, the customer’s delivery location, the item sold, and state or local rules. Businesses should confirm the correct delivery sales tax setup for their area before applying those settings in the POS.

How Toast handles sales tax on delivery services

Toast can support sales tax settings for delivery orders, but restaurants still need to configure those settings based on the rules that apply to their business. Delivery sales tax can depend on several factors, including the restaurant’s location, the customer’s delivery location, the items sold, and state or local tax rules.

Once the correct tax rates and dining option settings are configured in Toast, those settings can help apply sales tax to delivery orders in the POS. Restaurants should review these settings regularly, especially if they deliver across multiple jurisdictions, operate more than one location, or sell items that may be taxed differently.

Collecting sales tax on delivery orders is only part of the process. Restaurants also need to track the tax collected, keep those funds available for payment, and file and remit sales tax according to the required schedule. An integrated solution like DAVO can help with the post-collection steps by setting aside collected sales tax daily, then filing and paying sales tax when it is due.

How to add sales tax to individual items in Toast

Toast also allows restaurants to add a tax to an individual item. This may be helpful when certain items need different tax treatment or when a fixed or percentage charge needs to appear separately on the Sales Summary report.

For example, alcoholic beverages may be taxed differently from food items in some states or local jurisdictions, so a restaurant may need to apply a separate tax rate to those items. Some jurisdictions may also tax prepared items differently, such as hot items versus cold prepackaged items, or require a fixed tax or charge for certain items.

To add a tax to an individual item in Toast:

1. In Toast Web, go to Menus > Settings > Manage tax rates.
2. Add the new tax and give it a clear name.
3. Go to Menus > Bulk management > Advanced properties.
4. Use Show/hide to display Applicable Taxes.
5. Add the tax to the individual items, groups, or menus that need it.
6. Save and publish your changes.

Item-specific tax settings can also inherit from the menu group by default, or they can be configured for a specific item. This gives restaurants more control when certain menu items need special tax handling.

How do I find my sales tax on Toast?

Restaurants can review sales tax collected in Toast through the Sales Summary report. To find Toast sales tax report information:

1. In Toast Web, go to Reports > Sales > Sales summary.
2. Adjust the date range for the report.
3. Review the Tax Rate section.
4. View the tax amount and net sales for each separate tax rate you have set up.

Toast recommends splitting up each separate tax rate so reporting is easier to review. For example, a restaurant may set up a liquor tax rate separately from a sales tax rate and a local county tax rate, depending on the rules in its area.

Clear tax reporting can make it easier to understand how much tax was collected during a specific period. It can also help when preparing to file and pay sales tax.

Common Toast sales tax challenges for restaurants

Sales tax can be especially challenging for restaurants because rates and rules may vary by location, item, and order type. Even when Toast sales tax settings are configured correctly, restaurants still need a process for reviewing rates, setting aside funds, and meeting filing deadlines.

Common challenges include:

• Different tax rates for different cities, counties, or states
• Different rules for prepared food, cold items, alcohol, delivery, or takeout
• Multiple restaurant locations with different tax requirements
• Changing sales tax rates or local rules
• Item-specific taxes, fees, or bottle deposits
• Collected sales tax being mistaken for available revenue
• Monthly, quarterly, or other filing deadlines

For busy restaurants, the issue often starts after tax is collected. Sales tax collected from customers should be available when returns and payments are due. If those funds stay mixed with operating revenue, it can be easier to accidentally spend money that needs to be remitted later.

How restaurants can streamline sales tax management with Toast POS

Restaurants can use Toast’s tax settings and reporting tools as part of a more organized sales tax process. That starts with confirming the correct tax rates, applying those settings carefully in Toast, and reviewing sales tax reporting regularly so collected tax is easier to track.

It is also important to keep collected sales tax separate from general operating funds whenever possible. Sales tax collected from customers is money the business will need to remit later, so setting it aside can help avoid cash-flow issues when filing deadlines arrive.

For restaurants that want to reduce manual work, sales tax automation can help manage the steps that happen after Toast collects tax. An integrated solution like DAVO can set aside collected sales tax daily, then file and pay sales tax on the assigned filing schedule.

Does Toast pay sales tax for you?

No. Toast provides tools that help restaurants configure tax settings, apply tax rates, and review sales tax reporting, but its standard tax settings do not handle sales tax filing or payment on a restaurant’s behalf.

Toast’s own support content states that Toast has no obligation to determine whether taxes apply to a business or transaction, or to calculate, collect, report, or remit taxes to a tax authority. In practical terms, restaurants should treat Toast as a POS tool for configuring and tracking sales tax, while the business remains responsible for filing and remitting sales tax to the appropriate tax authorities.

Restaurants that want help with the step after collection can use an integrated sales tax solution like DAVO, which connects with Toast, sets aside collected sales tax daily, then files and pays sales tax on the assigned filing schedule.

How DAVO helps after Toast collects sales tax

Toast helps restaurants configure and report sales tax in the POS. DAVO helps manage what happens after sales tax is collected.

DAVO integrates with Toast to help automate sales tax management for restaurants. Each day, DAVO sets aside the sales tax collected through Toast into a separate secure account. Then, when sales tax is due, DAVO files and pays on the assigned filing schedule.

That daily set-aside can help restaurants avoid accidentally treating collected sales tax as spendable business revenue. It also reduces the manual work of tracking collected tax, preparing returns, and remembering payment deadlines.

With DAVO, restaurants can connect Toast to an automated sales tax solution that helps make filing and payment more manageable. To learn more, schedule a business success call and see how the guarantee helps protect eligible businesses when sales tax is filed and paid through DAVO.

Frequently asked questions

RELATED POSTS

Square for restaurants: a closer look at features, functionality, and fit How to use Toast POS: Setup, Orders, and Payments How Toast POS improves restaurant operations