What expense category is Non-Food Restaurant Supplies?

Running a successful restaurant requires a vast inventory of non-food supplies. From the glassware and flatware on the tables to the pots, pans, and cleaning chemicals in the kitchen, these items are the essential tools of the trade. 

While these purchases are a constant and necessary operational cost, their tax treatment is not always a simple, one-time deduction. The IRS requires you to categorize these items based on their cost and useful life. 

Some are currently deductible supplies, while others are long-term assets that must be depreciated. This guide will clarify how to classify your non-food restaurant supplies to ensure your financial reporting is accurate and compliant.

Restaurant Supplies (Non-Food) Category

There is no single expense category for all non-food restaurant supplies. Their classification depends on whether they are a consumable supply or a durable piece of equipment.

1. Supplies (Currently Deductible): The cost of materials and supplies that are normally used within one year is a currently deductible expense. This is reported under the supplies category. This includes items like cleaning chemicals, paper goods, and other low-cost, short-life items.
2. Depreciable Assets (Capitalized): Durable items that are expected to last more than one year are capital expenditures. As explained in IRS Publication 946, you cannot deduct the entire cost in the year you buy them. Instead, they must be capitalized and recovered over time through depreciation. This includes items like dishware, glassware, flatware, and kitchen smallwares (pots, pans, utensils).

Important Considerations While Classifying Restaurant Supplies (Non-Food)

The most critical factor is distinguishing between a currently deductible supply and a capital asset that must be depreciated.

The One-Year Rule

This is the primary test from IRS Publication 535. If an item is expected to be useful for one year or less, it can be expensed as a supply. If its useful life extends substantially beyond the year they are placed in service, it must be capitalized. Durable goods like plates and pans are expected to last more than a year.

The De Minimis Safe Harbor Election

To simplify recordkeeping for smaller purchases, IRS Publication 535 provides a powerful de minimis safe harbor election. This allows you to deduct the cost of tangible property in the current year if it falls below a certain threshold (generally $2,500 per item or invoice for businesses without an applicable financial statement). 

This is a practical way to immediately expense many smallwares and dishwares purchases that would otherwise need to be depreciated.

Section 179 Deduction

For larger purchases of durable supplies that must be capitalized (like a full set of new glassware and flatware), you may be able to elect to deduct the full cost in the first year using the Section 179 deduction, subject to annual limits.

Tax Implications and Recordkeeping

The reporting for these supplies depends entirely on their classification.

How to Report the Costs

For a sole proprietor filing a Schedule C (Form 1040):

• Supplies: The cost of consumable supplies like cleaning chemicals is deducted on Part II, Line 22, Supplies.
• Depreciation: The annual depreciation deduction for capitalized items like dishware and smallwares is calculated on Form 4562 and carried to Line 13 of Schedule C.

What Records to Keep

You must have documentary evidence to substantiate all your supply and equipment costs. Your records should include:

• Invoices from all restaurant supply vendors.
• Receipts for all purchases.
• Proof of payment, such as canceled checks or credit card statements.

How Sage Expense Management (formerly Fyle) Can Automate Expense Tracking

Sage Expense Management helps you capture and correctly categorize all your non-food supply purchases, ensuring you have a complete and compliant record for tax time.

• Capture All Purchases: Instantly capture receipts from restaurant supply stores using the mobile app or email forwarding.
• Track by Location or Department: Code purchases to a specific restaurant location or department (e.g., Kitchen, Bar) for precise cost control.
• Enforce Capitalization Policies: Sage Expense Management's policy engine can flag high-cost purchases that exceed your de minimis threshold for proper capitalization.
• Automate Your Accounting: Sync all categorized expenses to the correct GL account in QuickBooks, Xero, NetSuite, or Sage Intacct.