25 terms

Restaurant payments and tax glossary

Plain-English definitions of the payments, payroll-tax and delivery terms on a restaurant's statements: interchange, effective rate, card-not-present, Section 45B, Form 8846, error charges, rolling reserves and more.

Card processing fees

Card-not-present (CNP): A payment where the card is not physically read by a terminal, such as online orders and keyed-in cards. CNP payments carry higher interchange and, on many processors, a higher contracted rate than card-present payments.Full answer
Early termination fee: A charge in a processing or POS agreement for ending the contract before its term. Check the amount and whether hardware financing or subscription balances also come due.
Effective rate: Total processing fees divided by total card volume for the same period, expressed as a percentage. It is the single number that shows what you actually pay, regardless of how the statement splits the fees.Full answer
Flat-rate pricing: A pricing model that charges one blended percentage plus a per-transaction fee regardless of the card used. Simple to read, but the processor keeps the difference when the underlying interchange is low.Full answer
Interchange: The fee the card-issuing bank receives on each card payment, set by the card networks (Visa, Mastercard) and varying by card type and how the card was taken. It is the largest part of processing cost and the part no processor can discount.Full answer Source: Visa USA interchange reimbursement fees (Apr 2026)
Interchange-plus pricing: A pricing model where the processor passes through the actual interchange and network fees and adds a fixed markup, usually a percentage plus a per-transaction fee. It makes the processor's margin visible on the statement.Full answer

FICA tip credit (Section 45B)

Amended return: A corrected tax return filed after the original, used to claim a credit you missed. The FICA tip credit can be claimed this way within 3 years of the original return's due date.Full answer
Credit carryback and carryforward: Rules that let an unused nonrefundable credit offset tax in another year. The FICA tip credit carries back 1 year and forward up to 20 years.Source: IRS Instructions for Form 3800
Creditable tips: Tips on which the FICA tip credit is computed: an employee's tips for the month minus the amount needed to bring their cash wage up to $5.15 an hour. Never less than zero.Full answer
FLSA tip credit: A minimum-wage rule, not a tax credit: employers may pay tipped staff a cash wage as low as $2.13 and count up to $5.12 of tips toward the $7.25 federal minimum. Several states, including California and Washington, do not allow it.Full answer Source: US DOL Fact Sheet 15
Form 8846: The IRS form used to claim the FICA tip credit. Line 1 is tips, line 2 the tips needed to reach the $5.15 floor, line 3 creditable tips, and line 4 the credit at 7.65%.Full answer Source: IRS Form 8846
Section 45B: The Internal Revenue Code section that creates the FICA tip credit: a federal income tax credit for the employer share of Social Security and Medicare tax paid on employee tips above the $5.15 per hour floor.Full answer Source: 26 U.S. Code 45B
Social Security wage base: The annual earnings cap for the 6.2% Social Security tax: $176,100 in 2025 and $184,500 in 2026. Tips paid after an employee passes it earn only the 1.45% Medicare portion of the tip credit.Source: SSA contribution and benefit base

Delivery-app error charges

Error charge (DoorDash): DoorDash's deduction from a restaurant's payout for a missing or incorrect item it attributes to the store, from 25% to 100% of the item price plus tax. Disputable within 14 days.Full answer Source: DoorDash Merchant Help
Order error adjustment (Uber Eats): Uber Eats' charge to a restaurant for missing items, incorrect items or incorrect orders, at the food sales cost including tax. Disputable within 30 days of the order date.Full answer Source: Uber Eats Merchants: Order errors
Prepaid order adjustment (Grubhub): Grubhub's merchant-funded refund for missing items, incorrect preparation or food quality issues. Disputable within 30 days.Full answer Source: Grubhub restaurant policies

Supplier invoice errors

Catch weight: Products billed by actual weight rather than a fixed case price, common for meat, seafood and cheese. The invoiced weight should match what was received.
Cost-plus pricing: A distributor agreement that prices products at the distributor's cost plus a fixed markup. Auditing it means checking both the markup and what counts as cost.
Credit memo: A supplier document that reduces what you owe, issued for shorted, damaged or returned items. If it is not applied to a later invoice or statement, the credit is lost.Full answer
Short shipment: A delivery that contains fewer cases or units than the invoice bills. Caught at receiving, it becomes a credit request; missed, it is paid in full.Full answer

Held deposits and equipment leases

Funds hold (deposit freeze): A processor delaying or stopping payouts while it reviews an account, often triggered by a volume spike, a jump in chargebacks or refunds, or missing verification documents.Full answer
MATCH list: Mastercard's database of merchants whose accounts were terminated for specific reasons, such as excessive chargebacks or fraud. Being listed makes it hard to open a new merchant account.
Non-cancellable equipment lease: A long-term lease for card terminals or POS hardware, often four years or more, that cannot be ended early without paying the remaining payments. Frequently costs far more than buying the equipment.Full answer
Rolling reserve: A share of each day's card sales that a processor holds back for a set period, then releases on a rolling basis, as protection against chargebacks and refunds.Full answer

General

Chargeback: A card payment reversed by the cardholder's bank after a dispute. The merchant loses the sale amount, usually pays a chargeback fee, and can respond with evidence.

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