The IRS has lets us all know what is, and what is not, a restaurant, for purposes of the rule that allows a 100% deduction for certain business expenses for food and beverages provided by a restaurant during 2021 and 2022.

For purposes of 100% deduction, a “restaurant” is a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.

However, a restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or vending machine or kiosk. The 50% deduction limitation continues to apply to the amount of any deduction otherwise allowable to the taxpayer for any expense paid or incurred for food or beverages acquired from these types of business.

The 50% deduction limitation also continues to apply to any eating facility located on the business premises of the employer and used in furnishing meals excluded from an employee’s gross income, and any employer-operated eating facility treated as a de minimis fringe benefit, even if such

HINT – Business that provide qualifying restaurant meals for employees, customers or prospective customers the qualify for the 100% deduction need to track these expenses separately from those qualifying for only a 50% deduction. They should also be tracking nondeductible entertainment expenses separately from meals and travel expenses.

ACTION ITEM – Add general ledger accounts for the following to your chart of accounts: 1) 2021-2022 100% Deductible Restaurant Meals. 2) 50% Deductible Meals. 3) Non-Deductible Entertainment. Then be sure items are properly coded to the correct general ledger account.

For more information see IRS Notice 2021-25 and