And Since We Were Talking About Taxes…

restaurant taxes restaurant business plan

Last month I wrote about sales taxes and how restaurant owners need to get a grip and remember that the funds they collect are not their personal line of credit. To my surprise it was the first time I had gotten “fan mail” from both tax attorneys and tax enforcement people which tells me that my recommendations were spot on. For some reason however I didn’t hear from a single restaurant operator to say that this practice helped them address a problem that is wide spread throughout the industry.

Now the big question down in the US Capital is whether they can effect tax reforms which will benefit small businesses and the general public. In my December 2016 Financial Crystal Ball for 2017, I predicted for the second time that even if the dysfunctional Congress and administration managed to get ANYTHING accomplished in tax reform that it would not offer any real benefits to small businesses (SMBs) or the average middle class tax payer. For my “hat trick” (that one is for you Fred!), I continue to stand with this prediction and thousands of SMB owners agree.

According to a CNBC / SurveyMoney poll released on September 25th found that less than one-third of the SMBs (31%) believed that there would be any positive changes in tax policy to have a positive impact on their businesses. This number is down from 41% quarter over quarter. The survey found that while many remain confident about improvements in the economy, they are running out of confidence with the administration to make good on its promises. Over 33% believe that if a tax reform is enacted that it will have “no effect on their business” while 27% expect the tax policy to have a negative

While little positive effect is expected, taxes remain the most commonly cited critical issue for SMBs with 22% declaring it to be the most important issue facing their business followed by employee healthcare at 18% and need to increase customer demand at 13%.  A fact that I found pretty odd because as an entrepreneur – I always thought the universe revolved around customer demand.  If they aren’t buying, then I had no taxes to pay or employees to insure!  It tells me a lot about priorities.

Another interesting statistic was the confusion that SMBs had over what their actual effective tax rate was.  Approximately 22% didn’t know what the rate was for 2016 and an equal amount said they paid between 16% and 25% last year.  This is interesting because the corporate tax rate is 35% and a large percentage of real “Mom and Pop” SMBs spend their entire year trying to find ways to pay as little as possible or no taxes at all.  From the thousands of SMB tax returns we have seen, it would be hard to find a handful of businesses that pay that tax rate.    

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Regardless of the political orientation of SMB owners to one word that is agreed upon is “frustration”.  A growing bipartisan agreement these days is the lack of leadership and uncertainty that comes from the White House.  As one financial industry lobbyist (a Republican) recently told me that trying to get anything done – “is like nailing Jello to the wall”.

What does that mean for our industry? Restaurant people are survivors and rarely look up from the task at hand, which is operating their business.  The greater economy only affects them when it comes to customer count and top line revenue.  The rest they seem to take care of, often in very creative ways.  Hell, I owned a restaurant through the Jimmy Carter administration and I’m still standing! Right now people are just looking for some clarity, stability and certainty, not a constant state of entropy.

Through unsettling times it is also good to know that you have access to capital if you need it. SMB finance companies like Strategic Funding help businesses ride the waves particularly when the taxman comes knocking. I’ve walked in your shoes and know what it’s like to operate in uncertainty.

David Sederholt finance taxes restaurantA good tax policy and strategy will help your business stay healthy and grow. If you want to discuss your business or have questions on finance or operations, you can email me at

David Sederholt
David Sederholt is a multi-discipline entrepreneur who has launched and built numerous companies in specialty finance, foodservice and commercial real estate over 40 years. After owning, financing and operating over a dozen restaurants in his career he found a niche in serving small businesses seeking financing and strategic advice. For 10 years he served as Chief Operating Office of Strategic Funding Source, Inc., (now called Kapitus). David has also been a Managing Partner at a boutique investment bank and a specialty commercial real estate firm. He is a regular guest lecturer and contributor to business and industry publications as well as serving as a Board member and advisor to numerous companies and non-profit organizations. He is currently owner of Ragnar Partners, LLC, a private investment and advisory firm.