Texas MBGR vs MBST Cheat Sheet

If you sell cocktails in Texas, you do not have one booze tax. You have two. One is your tab. One is your guest’s tab. Mix them up and you will be garnishing your profit with penalties. This cheat sheet breaks down MBGR vs MBST in plain English, with real-world setups for bars, restaurants, and caterers that want to sell drinks without waking up to an audit hangover.

MBGR vs MBST In One Minute

Two taxes, same drinks, different wallets. MBGR is the business’s tax on gross receipts from mixed beverages. MBST is the sales tax charged to the customer on those same beverages. Both hit liquor, wine, beer when served by a mixed beverage permittee for on-premises drinking, plus the ice and nonalcoholic mixers that ride shotgun. They move together but they are not twins.

Who Is a Permittee?

If you hold a Texas Alcoholic Beverage Commission mixed beverage permit or a related permit that allows you to sell or serve alcoholic beverages for on-premises consumption, the mixed beverage taxes live on your bar. That includes mixed beverage permits, private club permits, and caterers operating under a mixed beverage permit. If you only have a beer and wine permit and do not prepare or sell mixed beverages under a mixed beverage permit, you are likely in the state and local sales tax world instead of the mixed beverage taxes for those sales.

If you are a restaurant with a Food and Beverage Certificate tied to a mixed beverage permit, you are still in MBGR and MBST territory when you sell drinks for on-premises consumption. The food side may be in limited sales tax, but the cocktails do not get a hall pass.

What Counts in the Tax Base

Think like an auditor, not a bartender. The tax base for MBGR and MBST is broader than just the whiskey. It covers:

- Mixed drinks and cocktails.

- Straight pours of liquor.

- Wine and beer served by a mixed beverage permittee for on-premises consumption.

- Ice, soda, juice, energy drinks, and other nonalcoholic mixers when they are served with or mixed into alcoholic drinks for on-premises consumption.

- Setups and bottle service components such as ice buckets and mixers that are part of the service.

That “on-premises” piece matters. These taxes target drinks that are prepared and served for immediate consumption at your place or at your catered event site. If you are in a setting where your items fall out of the mixed beverage rules and into regular sales tax instead, flip your mental switch accordingly. When in doubt, check your permit and the Comptroller’s Mixed Beverage Taxes publications.

Pricing Strategy: Add the Tax or Bake It In?

You get an actual choice with MBST. You can either add the 8.25 percent mixed beverage sales tax to the price on the menu, or you can list a tax-included price. Pick one and do not switch back and forth. Your POS and receipts should match the method you chose every day, every shift, every location you control.

MBGR is the opposite of flexible. You cannot pass MBGR to the guest as a tax or a fee. You also cannot calculate your menu price as “$10 including MBGR” and then back the tax out to reduce your gross receipts base. You can charge whatever menu price you want, but MBGR is a behind-the-scenes cost of doing business. Compute MBGR on your drink receipts after removing any MBST that you collected.

Here is how the math works in the two most common setups:

- MBST added on top. Menu shows Margarita $10. At checkout, you add MBST of $0.83. Guest pays $10.83. Your MBGR base is the $10, not $10.83, because MBST is not part of gross receipts for MBGR. MBGR you owe: $10 x 6.7 percent = $0.67.

- MBST included in price. Menu shows Margarita $10 tax included. To report correctly, back out MBST first. Taxable sales price for MBST equals $10 divided by 1.0825, which is $9.24. MBST included in that price is $0.76. That $9.24 is also your MBGR base. MBGR you owe: $9.24 x 6.7 percent = $0.62.

This is why the method you choose needs to be locked. Your numbers, your POS, and your staff wording should all be in sync.

Free Drinks, Promos, and Comps

Hospitality happens. Taxes still do too.

- Pure comps where the guest pays zero. If a guest does not give you any money or anything else of value and you hand over a drink, there is no MBGR and no MBST because there is no sale. That does not mean there is no tax at all. You generally owe use tax on the cost of taxable items you used to make that comp, such as mixers or other taxable ingredients where sales or use tax was not paid. Track the cost of those comped inputs, because auditors will ask.

- Comps tied to consideration. If the drink is “free” with a paid appetizer, a wristband, a cover charge, an event ticket, or any other purchase, that freebie has consideration. That means your normal mixed beverage taxes apply. Easiest path is to tax it based on your normal selling price for that drink, and make sure your POS can code that promo correctly so MBGR and MBST calculate.

- Staff drinks and shift drinks. Drinks provided to staff for free are not retail sales, so no MBGR or MBST, but you can trigger use tax on the cost of taxable mixers or supplies consumed. If staff pays a discounted price, you have a sale and both taxes apply on the amount paid.

- Donated drinks for charity events. If you pour drinks for a charity event where patrons pay for entry or for a package that includes drinks, you have consideration in the picture. Expect MBGR and MBST to apply to the portion that relates to the drinks. If the charity reimburses you, that payment is your gross receipts. Document the agreement and what you served.

Document comps in your POS and keep backup for the cost of ingredients used in comps. Make notes on whether there was any consideration in the transaction. Without that, an auditor can assume a sale happened and assess MBGR and MBST.

Tips, Service Charges, and Bottle Service

Tips can be safe or taxable depending on two things: are they mandatory, and do qualified employees get the money.

- Voluntary tips. If the guest chooses the amount and it is clearly a gratuity that you pass to qualified service employees, it is not part of the taxable base for either mixed beverage tax. Keep records that show the tips were disbursed to those employees.

- Mandatory service charges up to 20 percent. If your menu states an automatic 20 percent service charge, you list it separately on the receipt, and you actually pay that amount to qualified service employees, it is not taxable under MBGR or MBST.

- Exceeding 20 percent or not paid out. Any portion of a mandatory service charge that is more than 20 percent becomes taxable. Any portion that you retain, or that you pay to owners or non-service staff like cooks or managers, is taxable. Track what you collect and where it goes. If you keep a 3 percent house admin fee out of the service charge, that 3 percent is part of your taxable receipts.

- Bottle service and VIP packages. The ice buckets, mixers, and any mandatory gratuity attached to bottle service need to be reviewed. The alcohol and the mixers go into both tax bases. If the service charge meets the non-taxable rules above, it stays out. If not, bring it into both tax bases.

Your tip policy needs to be in writing, posted, and aligned with what your POS and payroll show. Auditors look for mismatches.

POS Setup That Saves Your Bacon

Want clean audits and easy filings? Your POS is your best friend if you build it right. Here is the short list of what to configure:

- Separate categories for alcoholic beverages, nonalcoholic mixers, ice or setups, and everything else. Map the correct tax codes so MBST applies to the right items and your drink sales can be reported cleanly for MBGR.

- A comps function that distinguishes pure comps from promos with consideration. Have buttons like “Comp no consideration” and “Comp with purchase” that trigger different tax logic and prompt for a reason code.

- Mandatory service charge lines that always ring separately and flow to a report showing amounts collected and amounts disbursed. If you retain any portion, make sure that portion is flagged as taxable.

- Inclusive pricing toggle. If you run tax-included pricing, hard-code it so staff cannot switch to tax-on-top during a busy Saturday. Document the method you are using so it stays consistent through staff changes.

- End-of-day reports that break out drink sales excluding MBST, MBST collected, comps by type, and service charges collected and paid out. Save those daily z-reports or exports.

Great recordkeeping beats great memory every time.

Filing and Payment Rhythm

Texas keeps the calendar simple. Both MBGR and MBST are generally due monthly by the 20th of the month following the reporting period. Even if you had a slow month or were closed, you still file. Late filings gather penalties fast, and they compound if you miss both taxes.

Set up both accounts in the Comptroller’s electronic filing system. Build a close checklist that rolls from your POS reports to your returns:

- MBST return. Report taxable sales and MBST collected. If you use tax-included pricing, remember to back out the tax to find the taxable sales amount.

- MBGR return. Report your gross receipts from mixed beverage sales excluding any MBST. That means if your menu was tax included, you have to remove the embedded MBST first, then compute MBGR on the remainder.

If you have multiple locations, consider filing consolidated data only if the state allows for your permits. Otherwise, keep each permit’s returns discrete with its own POS reports. Keep purchase invoices for mixers and supplies, payroll proof for tip disbursements, and a file for comps with cost backup.

Audit Triggers To Avoid

Auditors see the same patterns again and again. Dodge these and you cut a lot of risk:

- Switching between tax-included and tax-on-top MBST without a formal method change. Consistency is required.

- Showing MBGR as a separate tax line or “surcharge” on guest checks. You can raise prices, but you cannot state MBGR to the guest or compute price net of MBGR.

- Missing ice and mixers in your MBGR base when they were served with alcohol.

- Poorly documented comps. If you cannot show that a comp had no consideration, the state can treat it as a sale. If you cannot show the cost of comped taxable ingredients, use tax assessments can show up.

- Mandatory service charges over 20 percent or not fully paid to qualified employees, with no documentation. The taxable portion then gets added to your audit liability.

- POS mapping that leaves certain drink buttons untaxed for MBST or uncounted for MBGR. One rogue “Old Fashioned” button can cost you.

FAQs

Can I charge a “mixed beverage tax recovery fee” on the guest receipt to cover MBGR?

No. You cannot separately state MBGR or a surcharge that represents MBGR on the guest’s check. Set your menu prices where they need to be, then compute MBGR on your receipts behind the scenes.

If my menu prices are tax included, how do I compute MBGR and MBST?

Divide the menu price by 1.0825 to remove MBST. The result is your taxable sales amount for MBST and your gross receipts base for MBGR. Apply MBGR at 6.7 percent to that number, not to the full menu price.

We comped 50 margaritas at a staff party. Do we owe MBGR and MBST?

No MBGR or MBST, because there was no sale. You likely owe use tax on the cost of taxable items consumed, such as mixers or other taxable supplies used for those drinks, if sales or use tax was not already paid.

We run a $20 cover charge that includes two drink tickets. How do we tax that?

Those drinks have consideration because the guest paid for entry that includes them. Apply MBST and MBGR just as you do for sold drinks. The simplest approach is to treat the tickets at your normal drink price for tax purposes. Document how you priced it.

We add an 18 percent auto gratuity on parties of six or more. Is that taxable?

If that 18 percent is separately stated and you pay it to qualified service employees, it is not taxable under MBGR or MBST. If you keep any portion of it, or if any of it is paid to owners or non-service staff, that retained portion is taxable. If you bump the charge above 20 percent, the amount over 20 percent becomes taxable.

Do local sales tax rates affect MBST?

No. Mixed beverage sales tax is 8.25 percent statewide. Local sales tax does not change that rate.

Do I owe mixed beverage taxes on to-go cocktails?

Rules around alcohol-to-go involve multiple agencies and can hinge on permits and packaging. Mixed beverage taxes generally target drinks prepared and served for on-premises consumption. If you offer alcohol-to-go under a valid setup, check the current Comptroller guidance to confirm whether those sales fall under MBST and MBGR or under limited sales and use tax.

We sell beer and wine but do not have a mixed beverage permit. Which tax applies?

If you are not operating under a mixed beverage permit for those sales, you are likely in the limited sales and use tax system for your beer and wine. That is a different return than MBST and MBGR. Confirm your permit and tax type before you set up your POS.

We donate a bartender and drinks to a charity gala. The charity sells tickets. What now?

Because the attendees pay for entry that includes drinks, there is consideration. That triggers MBGR and MBST tied to the drinks served. If the charity reimburses you, that payment is your gross receipts. If not, you likely have use tax exposure on the cost of taxable items used. Put the agreement in writing and keep a tally of what was poured.

How long should we keep records?

Keep daily POS reports, comp logs, cost backup for comped items, service charge disbursement records, purchase invoices, and bank statements for at least four years. That covers the standard audit look-back.