The Research and Development (R&D) tax credit has been a lucrative tax credit for a number of industries for many decades, oftentimes producing federal and state credits in excess of 10 cents of every dollar spent on R&D. Admittedly, restaurants are not the first industry to come to mind when thinking about the credit. But should they be?

First: How to Qualify

To qualify for the credit, the business must meet all four parts of a four-part test, which requires the business to have activities that:

  1. Are intended to develop a new or improved business component (i.e., a product, process, software, technique, invention, or formula)
  2. Are done through a process of experimentation
  3. Fundamentally rely on the physical, biological, or computer sciences (yes, food sciences count!)
  4. Eliminate technical uncertainty

Where Do Restaurants Come Into Play?

There are three major areas where restaurants often find themselves having significant R&D expenditures that would make an R&D credit lucrative.

  1. New or improved product: This one is very simple to identify. New menu items and new beverages are great candidates for capturing R&D-eligible costs. Keep in mind that experimentation within the food sciences is a part of the development effort. Don’t forget about wineries, breweries, and distilleries on this one!
  2. New or improved processes: Finding new techniques to create a business component and show measurable improvement qualifies. This happens every day at restaurants!
  3. Software Development: Has your company developed or added new features to its app lately? If so, it likely required computer engineering efforts that qualify for the R&D credit. This is oftentimes the most overlooked activity that qualifies for the R&D tax credit for restaurants.

How Can GBQ Help?

GBQ can help by providing your company with an R&D study that meets IRS documentation requirements for claiming an R&D credit. To discuss this information in more detail or to learn more, please contact Jeff Waldeck or Leah Rogers.


Article written by:
Jeff Waldeck, CPA
Director, Tax & Business Advisory Services

« Back
Tags: SALT