Comp Cards

The Cost of Mishandled Comp Transactions Fraud and Abuse. One in ten controllable comp dollars is commonly lost to fraud.  Paper certificates lack inherent controls and are particularly susceptible.  Fraud is not limited to paper-based systems; a discount button on your POS system without appropriate controls also invites overuse and abuse.  Improper Accounting Results in an Inflated Tax Burden. The “double taxation penalty” occurs because the comp value is a restaurant expense, not revenue.  When you fail to appropriately recognize this expense, you artificially inflate your revenues, overstate your net income, and thus overstate your income and sales tax liability.  This taxation penalty often occurs when restaurants use a gift card for comp situations.

Differentiating Gift Cards and Comp Cards Gift Card Comp Card Purchased by Guest How Issued Provided by Restaurant Liability Financial Classification When Issued Expense* Revenue Financial Treatment upon Redemption Expense* Yes Subject to Sales Tax and Income Tax No Yes Subject to Sales Tax Escheatment No * Our Customers typically take the expense either at the time of issue or redemptions as company accounting policy dictates.

All restaurants recognize complimentary (comp) programs as part of doing business.  Whether used as a goodwill gesture for a guest or to extend a privilege to employees, every restaurant must handle comp transactions.  Comps are also great promotional tools, provide charitable donations, and can be used for trade compensation.

Despite their pervasiveness, comp transactions are often not well controlled or properly processed and leave many restaurants victimized by financial losses from fraud and an inflated tax burden from improper accounting.  See sidebar: “The Cost of Mishandled Comp Transactions”. Restaurants can ill afford these financial penalties, particularly when there are solutions to reduce fraud and to ensure proper accounting and tax reporting for comp transactions.

Paytronix provides solutions to arrest fraud and ensure proper accounting and tax reporting.  Our comp card solutions include POS integration to ensure accurate transaction processing and a seamless experience for your guests without manual intervention.  

Plus, Paytronix’s powerful reporting capabilities arm you with details about comp issuance and redemption that allow you to ensure the administration of your comp programs aligns with your business objectives and adheres to the advice and guidance of your accounting and legal teams.  

To find out more about how Comp Programs can help your business, contact us.

Learn more about specific types of comp programs:

• Employee Dining and Meals

• Marketing and Promotions

• Guest Goodwill

• Charity

• Trade Compensation

Loyalty Improvement Series Article:

Correctly Accounting for Comp Cards

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