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Current Topics, California, OTA, Sales Tax, Restaurant Colette Karam Current Topics, California, OTA, Sales Tax, Restaurant Colette Karam

California Restaurant Sales-Tax Audits: The 80-80 Rule and the Cost of Inadequate Records

California restaurant sales-tax audits can create substantial exposure when a restaurant does not maintain detailed records. A recent California Office of Tax Appeals opinion, MPAAKINC, dba Anandabhavan Biryamhut, 2026-OTA-369, illustrates several recurring audit risks for restaurants: unreported taxable sales, the California 80-80 rule, sales of cold food, and the consequences of incomplete books and records.

OTA’s July 2026 business tax opinion list identifies MPAAKINC as a nonprecedential decision involving unreported taxable sales, the restaurant 80-80 rule, sales of cold food, Revenue and Taxation Code section 6359, Regulation 1603, and the submission of hallucinated or fictitious citations.

For restaurant owners, operators, bookkeepers, and investors, the larger issue is straightforward: once records are incomplete, CDTFA may reconstruct taxable sales using indirect methods. That can leave the taxpayer defending against an assessment built from bank records, federal gross receipts, markups, observation tests, point-of-sale summaries, or other available data rather than the taxpayer’s own reliable books.

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