Central Mass Towns Miss Out on Millions of Tax Revenue

Monday, April 16, 2012

Sandy Meindersma, GoLocalWorcester Reporter

Two-thirds of Central Mass. towns are missing out on millions of dollars in tax revenue, because they have not adopted the Local Option Meals Tax, even though the impact on the typical diner is minimal.

The 23 Central Mass towns that have adopted the meals tax have received more than $11.1 million since Fiscal 2010, when the tax first became available. The tax is .75 percent of the total bill.

To collect the tax, the city council or board of selectmen must vote to adopt it, along with an effective date. To date, 151 cities and towns have adopted the meals tax and more than $150 million has been distributed statewide.

Local Officials Object

Anthony Renzoni, a member of Holden’s Board of Selectmen, spoke vehemently against the local option tax and objected to Beacon Hill’s decision to reduce local aid while continuing to collect the same amount it always had.

“That 75 cents will increase someday to $1.50,” Renzoni said. “And in Holden, the majority of the patrons to Holden restaurants are Holden residents. We tax them enough. I’m not going to endorse taking more money from the residents when there are still ways to streamline government.

“It’s a great thing for the city of Worcester, where people from surrounding communities go to the city to eat, but it’s not right for the town of Holden.”

Sheila Dibb, a selectman in Rutland said that their board was asked by the Rutland Business Association not to adopt it, and to never consider the matter again. Dibb said that while the board did vote not to adopt the tax, it did not foreclose considering it in the future.

“We’re such a small town, and there are only 6 or 7 restaurants, and some of them have struggled,” Dibb said. “They’re mostly not chains, and the additional tax could be the straw that breaks the camel’s back for them”

Fellow Rutland Selectman Joseph Becker also opposes the tax. “It is one thing to raise taxes after receiving the positive vote of the Town as a whole, or to increase the price for a service to be in line with the cost of providing that service and an entirely separate issue to impose a tax related to a certain industry just because a state law says it is ok by them,” Becker said.

Some Communities Win Big

Worcester is the region’s biggest winner, collecting $4.85 million to date; for fiscal 2012, the city is on pace to collect more than $2 million in meal taxes. The city was among the state’s first adopters, and made the tax effective on the earliest possible date, October 1, 2009.

Christina Andreoli, a spokesperson in the city manager’s office said meals tax revenues are helping to minimize the city’s deficit. “The city is currently facing a $3.2 million deficit so the loss of these funds would further impact the City’s budget deficit,” she said.

Shrewsbury collects about $85,000 per quarter from the meals tax, over $300,000 per year. Town Manager Daniel Morgado said he likes that it is a voluntary tax.

“It’s a philosophical change to how we tax – unlike taxing a house or a car, just because it exists, the meals tax taxes economic activity, and people can choose to participate or not.”

The town of Townsend just adopted the tax in January and is expecting to receive about $70,000 per year in revenue from it.

“We have about a dozen restaurants in town, and many of them are seasonal,” Andy Sheehan, Town Administrator, said. Sheehan said the town voted to adopt the meals tax after a summit meeting on the town finances.

Impact on Local Businesses

All restaurants are required to charge the tax, from the coffee shop to the local pub to the five star restaurant. Most restaurant patrons either don’t know or don’t care about the additional tax, but that 75 cents per $100 can be a sticking point for banquet customers.

Kathy McCormick, owner of Finders and Keepers Pubs in West Boylston said she has not heard any complaints about the additional tax.

“No one has ever said anything,” McCormick said. “I thought I would hear something, but nobody has ever even mentioned it.”

Mark Waxler, general manager of the Beechwood Hotel, which operates Ceres Bistro as well as a banquet facility, said Worcester’s adoption of the tax has not impacted the restaurant, but it has been an issue on several occasions when planning a banquet.

“It doesn’t affect Ceres,” Waxler said. “But if it’s a $10,000 or $20,000 banquet, then it’s some serious money. If we’re competing within the city, it doesn’t hurt us, but if we’re competing with someone on the outskirts of the city, they do complain. We pride ourselves on quality and service. If someone complains, we’ll look at everything, but we tell them this is what you’re getting, and it’s going to be great.”

Robert Bliss, Mass. Department of Revenue spokesman, said the total amount collected in Local Option Meals Taxes is over $150 million statewide, and that it does not seem to be affecting the restaurants’ business.

“I don’t think people are making a judgment on where they eat based on the .75 percent tax,” he said.