Bakeries, CPA & Tax Services

Why Bakeries in Dallas Need a CPA Who Understands Food Production

Running a bakery in Dallas-Fort Worth means managing razor-thin margins while juggling ingredient costs, daily waste, multiple revenue channels, and Texas sales tax rules that treat different baked goods differently depending on how and where they’re sold. A general-purpose accountant who doesn’t understand food production will miss deductions, misclassify revenue, and cost you money every single month.

At AG Freideman, we work with bakery owners across Dallas, Plano, Frisco, and the surrounding suburbs who need a CPA that understands their operations from the mixing bowl to the balance sheet. Al Freideman has over 30 years of experience in tax and accounting, and he handles every bakery client personally. No hand-offs to junior staff, no guessing about your industry. Just one licensed CPA who knows how bakeries actually make (and lose) money.

How Should Bakeries Track Ingredient Inventory and Waste for Tax Purposes?

Ingredient inventory and spoilage are among the largest controllable costs in any bakery, and the way you track them directly affects your cost of goods sold (COGS) deduction on your tax return. Properly documenting waste, spoilage, and shrinkage can reduce your taxable income significantly, but only if your books capture it correctly.

Bakeries deal with perishable raw materials (flour, butter, eggs, dairy, fruit) that have short shelf lives. When ingredients expire or batches fail quality checks, that loss is a legitimate business expense. The IRS allows you to deduct inventory losses due to spoilage, damage, or obsolescence under Section 471, but you need consistent records to support the deduction.

Here’s what we set up for our bakery clients:

• Daily waste logs that track discarded ingredients and unsold finished products by weight and dollar value
• Monthly inventory counts reconciled against purchase invoices to calculate actual shrinkage
• COGS calculations that properly separate raw ingredient costs from packaging, labor, and overhead
• Accounting method selection (FIFO is typically best for perishable bakery ingredients) to accurately reflect the cost of what you actually used

Most bakery owners we meet are either not tracking waste at all or lumping everything into a single “supplies” category. Both approaches leave deductions on the table. Our monthly bookkeeping services ($300 to $600 per month) include proper inventory categorization so your books are always ready for tax time.

How Do Wholesale and Retail Revenue Channels Affect Bakery Taxes?

Many Dallas bakeries sell through multiple channels: a retail storefront, wholesale to restaurants and coffee shops, farmers markets, online orders, and catering. Each channel may have different sales tax obligations, different margin profiles, and different reporting requirements. Mixing them together in your accounting creates problems at tax time.

Wholesale sales to other businesses for resale are generally exempt from Texas sales tax when the buyer provides a valid resale certificate (Texas Form 01-339). Retail sales directly to consumers are taxable (unless a specific food exemption applies). Catering and event orders that include service, setup, or utensils are taxable regardless of the food items involved, because the Texas Comptroller treats “catering” as a taxable service.

We help bakery owners separate revenue by channel in QuickBooks or their accounting software so that each stream is tracked independently. This matters for three reasons:

• Sales tax accuracy: You collect and remit tax only where required, avoiding overpayment or underpayment
• Margin analysis: You can see which channels are actually profitable after accounting for delivery costs, packaging, and labor
• IRS compliance: Wholesale and retail income may need different reporting treatment, especially if you’re structured as an S-Corp filing Form 1120S

If your bakery earns revenue from three or more channels, you need a CPA who understands how each one flows through your return. Our business tax preparation for S-Corps and partnerships runs $1,000 to $2,000, and that includes proper multi-channel revenue classification.

Which Bakery Items Are Exempt from Texas Sales Tax?

Texas sales tax rules for bakeries are more nuanced than most business owners realize. The general rule under the Texas Tax Code is that food items sold for off-premises consumption are exempt from the state’s 6.25% sales tax (plus up to 2% local tax). However, bakery items cross into taxable territory depending on how they’re sold and whether utensils, plates, or eating areas are provided.

Here’s how the Texas Comptroller breaks it down for bakeries:

• Tax-exempt: Bread, rolls, cakes, cookies, pastries, and other baked goods sold unheated for takeaway without plates or utensils
• Taxable: Any baked item sold with eating utensils, served on plates for dine-in consumption, or heated at the customer’s request
• Taxable: Beverages like coffee, tea, smoothies, and soft drinks (always taxable in Texas regardless of how they’re sold)
• Taxable: Catering orders, even if the food items themselves would normally be exempt, because the overall transaction is classified as a catering service

Getting this wrong means either overcharging your customers (and losing sales) or undercharging and owing the Comptroller the difference plus penalties. We review our bakery clients’ point-of-sale configurations to make sure each item is coded with the correct tax status. Our sales tax filing and compliance services are quoted based on your filing frequency and complexity.

How Can Bakeries Maximize Equipment Depreciation Deductions?

Commercial bakery equipment represents a major capital investment, and the IRS offers multiple ways to recover that cost through depreciation deductions. For 2026, Section 179 allows businesses to deduct up to $1,250,000 of qualifying equipment in the year it’s placed in service, rather than spreading the deduction over several years.

Common bakery equipment that qualifies for Section 179 or MACRS depreciation includes:

• Ovens (deck ovens, convection ovens, rack ovens): typically 7-year MACRS property
• Mixers, sheeters, and dough dividers: 7-year property
• Refrigeration units (walk-in coolers, blast chillers, reach-in freezers): 7-year property
• Display cases and POS systems: 5 to 7-year property depending on classification
• Delivery vehicles: subject to separate depreciation limits, but Section 179 still applies

Bonus depreciation remains available in 2026, though the percentage has been stepping down since 2023. Choosing between Section 179, bonus depreciation, and standard MACRS depreciation depends on your bakery’s total income, other deductions, and whether you expect revenue to grow or stay flat. This is exactly the kind of decision we work through in a tax planning session (starting at $197) so you get the maximum benefit in the right tax year.

Bakery Tax Mistakes We Fix

After 30 years of working with small business owners in Dallas, Al has seen the same costly mistakes from bakeries that come to us after working with a general accountant or trying to handle their own books:

• Not separating COGS from operating expenses: Ingredient costs belong in cost of goods sold, not lumped into “supplies” or “miscellaneous.” This distinction directly affects your gross profit calculation and the deductions available to you.
• Collecting sales tax on exempt bakery items: If you’re charging 8.25% on a bag of cookies sold for takeaway without utensils, you’re overcharging your customer. If you’re not collecting tax on dine-in items or catering, you owe the Comptroller.
• Missing the Texas Franchise Tax filing: Every Texas LLC and corporation must file a Franchise Tax report and Public Information Report annually, even if you owe $0. Missing the deadline can result in forfeiture of your business entity. We handle this for $250 to $500.
• Failing to track equipment purchases for depreciation: Buying a $15,000 oven and expensing it as a lump “equipment” cost without proper depreciation scheduling means you may be missing future-year deductions or triggering IRS scrutiny.
• Running personal and business expenses through one account: This is the fastest way to lose your liability protection as an LLC and create a nightmare at tax time. We set up clean chart-of-accounts structures from day one.

Ready to Work with a CPA Who Understands Bakeries?

If you’re running a bakery in Dallas, Plano, Frisco, McKinney, Richardson, or anywhere in the DFW area, we’d like to help you get your finances right. Al Freideman handles every client personally, and your first consultation is free. Call us at (972) 893-3481 or book a free consultation online to get started.