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New Smallwares Accounting Method Simplifies Recordkeeping and Allows Immediate Deduction

A new IRS procedure allows restaurant and tavern owners to change accounting methods and expense the cost of replacement dishware, glassware and other items that previously had to be depreciated. The smallwares method of accounting allows restaurants and taverns to deduct the cost of these replacement items in the year purchased.

Generally smallwares consists of the following categories: glassware, flatware, dinnerware, pots and pans, table top items, bar supplies, food preparation utensils and tools, storage supplies, service items and small appliances costing $500 or less.

The smallwares accounting method can only be used by persons engaged in the business of operating a restaurant or tavern that prepares food and beverages. It isn't available for new business start-up purchases of smallwares and does not apply to items purchased and stored at a warehouse or location other than the restaurant or tavern where the items are used.

Use Form 3115, Application for Change in Accounting Method to elect this method. You may download Form 3115 (PDF) and Revenue Procedure 2002-12 (PDF).