The IRS and the Treasury Department have provided guidance on the temporary 100% deduction for expenses that are paid or incurred between Jan. 1, 2021 and Dec. 31, 2022 for food or beverages from a restaurant.

The new guidance is for the Taxpayer Certainty and Disaster Relief Act of 2020, which added a temporary exception to the 50% limit on the amount a business may deduct for food or beverages.

The temporary exception allows the 100% deduction for food and beverages.

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. 

But the IRS stresses that restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores. 

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.