PAYMENT PROCESSORS · QUICKBOOKS ONLINE & XERO
How to Categorize Toast Fees and Deposits in QuickBooks and Xero
Last Updated: October 5, 2026Toast deposits are net of card fees, and for a restaurant they are also net of things that were never yours. Tips collected for staff, sales tax collected for the state, and third-party delivery commissions all pass through the same deposit. Booking it as sales inflates revenue, buries a tax liability inside income, and makes every labour and margin percentage wrong.
The Short Answer
| What the charge actually is | Gross sales, minus card processing fees, minus tips paid out, minus sales tax collected, minus delivery commissions, plus the separate Toast software subscription and any hardware or Toast Capital repayments. |
| Where the fee belongs | Merchant fees, separate from bank charges. Subscription to software. Hardware above threshold is a fixed asset. |
| QuickBooks Online default | Merchant Account Fees, a software account for the subscription, Machinery and Equipment for terminals. |
| Xero default | Custom Merchant Fees, Subscriptions, Office Equipment. |
| Expense or balance sheet | Fees and subscription are expenses. Tips are a liability. Sales tax collected is a liability. Gift cards sold are a liability. Toast Capital principal reduces a liability. |
| Bank feed descriptor | Commonly contains TOAST, usually as a deposit reference. The subscription normally arrives as a separate charge. |
Three Things in the Deposit That Are Not Yours
Tips. Money collected on behalf of staff passes through your account. It is a liability until paid out, not revenue. Leaving tips in sales inflates revenue and destroys every percentage a restaurant actually manages against — labour cost, prime cost, average ticket.
Sales tax. Collected for the state and owed to it. Inside revenue, it both overstates income and leaves nothing to remit against.
Gift cards. Selling one is not a sale; redeeming it is. Recognising on sale overstates revenue now and understates it later, and in a seasonal restaurant the two land in different periods.
Work from the Toast sales summary, not the deposit: gross sales to revenue, tax to the tax liability, tips to tips payable, fees to merchant fees, comps and discounts against revenue. What remains should equal the deposit.
Third-Party Delivery Is Its Own Problem
Orders arriving through delivery marketplaces carry commission that can run to a substantial share of the ticket, and they often flow through Toast alongside your own sales.
If delivery revenue and commission are not separated from dine-in, you cannot answer the only question that matters about delivery: whether it makes money at all. Many restaurants discover, once the split exists, that delivery contributes volume and almost no margin.
Keep delivery revenue and delivery commission in their own accounts, by platform where there is more than one.
Toast Fees and Deposits Categorisation FAQs
Are tips collected through Toast part of my revenue?
No. Tips collected on behalf of staff are a liability until paid out, not income. Leaving them in sales inflates revenue and distorts labour cost percentage, prime cost and average ticket — the figures restaurants actually run on. They should sit in a tips-payable account and clear when paid.
How should Toast deposits be recorded?
From the Toast sales summary rather than the bank line. Gross sales to revenue, sales tax collected to the tax liability, tips to tips payable, processing fees to merchant fees, comps and discounts against revenue. The remainder should equal the deposit — if it does, nothing has been dropped.
Should delivery orders be separated from dine-in?
Yes, with commission in its own account. Delivery commission can take a large share of the ticket, and unless revenue and commission are split by channel you cannot tell whether delivery is profitable. Restaurants that do the split often find it contributes volume and very little margin.
This page is about where the transaction belongs in your books. Whether a cost is deductible, and how it is treated on a return, is a question for your CPA — and consistent categorisation is what lets them answer it without guessing. Dedicated bookkeepers from $75/month, extra hours at $15/hour, wholesale $10/hour for CPA firms, with a 100% money-back guarantee on your 1st retainer, refundable on the unused balance.
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