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Do your Restaurant Improvements Qualify for R&D Tax Credits?

December 17, 2018

Thinking of implementing new technologies in your restaurant or investing in building improvements? You could qualify for research and development tax credits.

Attention restaurant owners…are you taking advantage of research and development (R&D) tax credits? In an age where technology is an integral part of how restaurants operate, it is crucial for your establishment to find new ways to stay on the cutting edge and keep up with competition. But this can be costly….that’s where R&D credits can help.

What is the R&D Tax credit?

If your company has spent time and resources developing new or improved products and processes, you may qualify for the research and development (R&D) tax credit.

The R&D Tax Credit is a dollar for dollar reduction of a taxpayer’s federal income taxes. In many cases an R&D Credit can even reduce state taxes depending on whether or not a particular state’s laws allow taxpayers to take advantage of the credit. Many states do; however, the computation usually varies from state to state.

The credit was designed to incentivize businesses of all sizes to invest in research and development activities to increase technological growth and competitiveness.

How can restaurants take advantage of the credit?

In recent years, the restaurant industry has implemented a broad range of advanced technologies to stay on top of competition. Here are a few examples of activities and projects that qualify for the credit:

  • Implementation of mobile devices on tables for ordering
  • Online reservation system
  • Digital inventory tracking
  • New methods of payment
  • Automated purchasing
  • Optimizing manufacturing processes
  • New equipment to improve efficiency and precision

How do I know if the activity qualifies?

There is a 4 part eligibility test to qualify for the credit.

If your restaurant is typically involved in the following you may qualify for the R&D tax credit.

  1. Activities that are geared towards the Elimination of Uncertainty
  2. Activities which a Process of Experimentation
  3. Activities that are Technological in Nature
  4. Activities that meet the Qualified Purpose Test (Otherwise known as The Business Component Test). This test requires that your activities are intended to create a “new” product or improve an existing product or process required to make a product. Here the definition of “new” simply means new to your business.

Need help figuring out if your restaurant improvements qualify for the R&D tax credit? Reach out to any member of our Tax Services Team.

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