Sales tax in chain restaurants for economy menus

Oct 30, 2025

The Federal Fiscal Court (BFH) has ruled that a method of allocating the sales price of a value meal that results in the proportionate sales price of one of the products being higher than the individual retail price is not appropriate and therefore does not have to be recognized by the tax office (FA).

In the case in question, two limited liability companies (GmbHs) operated fast food restaurants as franchisees, where value meals (e.g., a drink, burger, and French fries) were also sold at a uniform total price for consumption outside the restaurant. For sales tax purposes, this constitutes two deliveries: the delivery of the drink is subject to 19% at the standard tax rate and the delivery of the food is subject to the reduced tax rate of 7%.

Since 2014, the two limited liability companies have divided the total price of the value meal based on the cost of goods, i.e.
the sum of all expenses for the food and drink. Since in the restaurant industry, the profit margin
on drinks is generally higher than that on food, this would result in a lower sales tax
than if the prices were divided according to individual retail prices.

The tax office considered the allocation according to the first method to be inadmissible, as it was more difficult to understand and did not lead to appropriate results. An allocation based on retail prices was considered more appropriate. The tax court, on the other hand, considered the so-called “food and paper” method to be admissible.

The BFH agreed with the FG that the taxpayer did not have to use the simplest allocation method. He could also use another method if it was at least as appropriate. However, the BFH ultimately did not recognize the “food and paper” method because, in some cases, it would result in the price of a burger with a high cost of goods sold in the menu exceeding the retail price of the burger. This contradicts economic reality. A method that leads to such a result is not appropriate.

The BFH also did not recognize a similar case with a similar calculation method in its ruling on the same day.

Source: BFH, ruling of January 22, 2025 – Ref. XI R 19/23 and XI R 22/22