(The information compiled below from IRS.gov provides an overview of which large food establishments need to file an 8027 form. Please consult with your accountant for specific tax advice related to your business. As a Washington Hospitality Association member, you are also entitled to 30 minutes of complimentary expert tax advice every year from our Advisory Network.)
Employers must annually report to the IRS receipts and tips from their large food or beverage establishments. Employers use Form 8027 to report that information. In addition, employers use Form 8027 to determine allocated tips for tipped employees.
You must file Form 8027 if you’re an employer who operates a large food or beverage establishment. A large food or beverage establishment is a food or beverage operation:
- That is located in the 50 states or in the District of Columbia
- Where tipping of food or beverage employees by customers is customary and
- Whose employer normally employed more than 10 employees on a typical business day during the preceding calendar year. We call this the 10-employee test.
There are a few exceptions, such as fast-food operation. A fast-food operation is one that customers order, pick up and pay for food or beverages at a counter or window, then carry to another location on or off the premises.
Another exception is for establishments that are delivery or takeout only. Form 8027 is not required to be filed by either fast food or delivery/takeout only establishments.
However, the other tip laws continue to apply.
For instance, tips received are taxable if any tipped employee receives more than $20 per month in tips. The employee must report the tips to the employer by the tenth day of the following month in which the tips are received.
Food and beverage operations can be viewed as separate venues, doors, rooms outlets, establishments or cost centers.
A separate Form 8027 is filed for each separate operation with its own cost center. A cost center exists when the income and expenses are tracked separately for that activity. When an establishment has multiple locations, each location is considered a separate activity. Each location must file its own Form 8027.
To determine whether a business is a large food and beverage operation, all employees of the food or beverage operations are included, even if an individual operation has fewer than 10 employees.
The employee test also requires counting tipped and non-tipped employees, so managers, home cooks, waiters, bartenders, everyone is included except the 50% or more owner or fast-food operations.
Do not apply the 10-employee test separately to each food or beverage operation.
Operations file separate Form 8027 but combine employees to determine whether as considered a large food and beverage establishment, so please refer to the instructions for Form 8027 or the Treasury Regulations under Section 6053 for any additional information.