Accounting & Tax for Food Truck Businesses

Frequently Asked Questions

Is food from my truck taxable in New Jersey?

It depends on what you're selling and how. New Jersey exempts most unheated grocery-type foods but taxes prepared, heated food sold for immediate consumption at 6.625%. For a typical food truck selling hot sandwiches, cooked meals, or heated street food, the sales are almost certainly taxable. Cold beverages in sealed containers may be exempt, while fountain drinks and mixed beverages are taxable. Candy and confections are taxable. Bottled water is exempt. The practical takeaway: if you're running a hot food truck in NJ, assume your sales are taxable and register with the NJ Division of Taxation for a seller's permit. If you cater events in NYC or other states, those jurisdictions have their own food taxability rules that differ from NJ.

Can I deduct my food truck as a business vehicle?

Yes, but the tax rules for business vehicles depend on how the truck is used. A food truck used exclusively for commercial food service (not personal transportation) is a business asset, not a 'listed property' subject to the luxury auto limitations that apply to passenger vehicles. It can be depreciated as 5-year MACRS property, immediately expensed under Section 179 (2026 federal limit: $2,560,000), or fully deducted in year one using 100% bonus depreciation (permanent under OBBBA for property placed in service after January 19, 2025). A truck worth $80,000 could generate an $80,000 federal deduction in year one. NJ caps Section 179 at $25,000 and does not allow bonus depreciation, so plan for the NJ tax hit in years with large vehicle purchases.

How do I track food costs and inventory for tax purposes?

Food cost tracking starts with your purchases. Keep all supplier invoices organized by date and category. Your cost of goods sold (COGS) is calculated as: Beginning Inventory + Purchases minus Ending Inventory = COGS. Under IRC §471(c), small businesses with average annual gross receipts of $30 million or less can use a simplified inventory method. You can treat the cost of inventory items as deducted in the year purchased rather than tracking ending inventory precisely. This exception (added by TCJA) significantly simplifies bookkeeping for food trucks with modest revenue. Your target food cost percentage should be 28-32% of revenue; if it's significantly higher, that's a profitability problem (or a recordkeeping problem) that needs attention before tax time.

What licenses and permits are tax deductible?

All business licenses, permits, and regulatory fees are deductible as ordinary business expenses under IRC §162(a). This includes: NJ food establishment permit, county and municipal health permits, event vending permits, farmers market vendor fees, fire department inspection fees, and commissary or shared kitchen rental agreements. Annual permit renewals are current-year expenses. One-time setup fees for commissary buildout or equipment installation may be capitalized and depreciated. Annual NJ LLC fees ($75 filing) and the NJ minimum CBT tax ($375) are also deductible business expenses.

Should my food truck be an LLC or S-Corp?

At minimum, an LLC is worth considering for liability protection. A food truck with employees, customer-facing food service, and a vehicle creates meaningful liability exposure that a sole proprietorship doesn't protect against. An LLC is simple to maintain in NJ ($75 annual filing fee, $375 CBT minimum tax). The S-Corp election makes sense when your net profit consistently exceeds $60,000-$80,000 per year. At $100K net: sole prop SE tax approximately $14,129; S-Corp with $50K salary approximately $7,650. Net savings after compliance costs: roughly $2,500-$4,500/year. For seasonal food trucks where net profit varies significantly year-to-year, the LLC without S-Corp may be simpler. I'd analyze your specific income pattern before recommending.