I don't have whatever the IMPC is (504.6 of the IPC is about T&P valve discharge), so I can't help determine if it is not allowed by your code. Perhaps if you quote this section.
If it is similar to the IPC, section 501.6 states "
The temperature of water from tankless water heaters shall be a maximum of 140°F (60°C) when intended for domestic uses." Also, 501.2 states "
Where a combination potable water heating and space heating system requires water for space heating at temperatures higher than 140°F (60°C), a master thermostatic mixing valve complying with ASSE 1017 shall be provided to limit the water supplied to the potable hot water distribution system to a temperature of 140°F (60°C) or less." There is no similar restriction for tank type water heaters.
So what is "domestic". Not defined in any of the I codes. In some sections, "domestic" means "not commercial" (as in domestic vs commercial cooking appliances, dryers, dish/clothes washers, etc). In others it is the entire potable water system as opposed to the fire water system. The common dictionary definition is closer to the first - personal, home-related, household and family etc. One could make the argument that "domestic purposes" is for dwelling units only. I think in this case it really means water intended for human interaction. In other words, a potable water system in a restaurant could have both domestic and non domestic purposes - hand wash lavs and employee showers are domestic; dishwashers, pre-rinse sprays, 3 compartment sinks, mop basins, etc - not domestic.
Next, is this the public bathroom? If so then the IPC would require a tempering valve at the faucet anyway, so don't worry too much about scalding the customers.
So bottom line for IPC code requirements (not talking good design, just code) - If the water heater is a tank type - no restriction on water temperature regardless of use. If it is a tankless type, then the water supplied to lavs and showers needs to be less than 140 deg, other uses can be over 140. If the water heater is used for building heating, then all potable hot water must be less than 140 deg.
And do restaurant's require a higher water degree than 140?
Maybe. Depends on the dishwasher. Some sanitize with cooler water, some have boosters, and some require a high temp water supply. In large commercial/institutional buildings, we frequently provide both a 140+ system and a 120-ish system. These are usually generated at the higher temperature, then tempered down to the lower temperature via a mixing valve. The wash cycles go faster if the water is supplied at the usage temperature rather than waiting for a booster to heat the sump.