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Restaurants feel overtaxed

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This post is by SmartBlog on Restaurants and Restaurant SmartBrief contributor Janet Forgrieve.

In states and municipalities across the country, it’s a tossup as to whether public bookkeepers or private businesses have used up more red ink in the past couple of years; either way, it’s clear that several new proposals aimed at shoring up public resources have restaurants seeing red.

Struggling restaurants contributed less to the public coffers as business slowed, since taxes based on sales fell as traffic dropped and guests who did dine out opted for lower-priced meals to fit their newly lean budgets. Now, officials in several municipalities have proposed revenue-raising solutions that involve increasing existing taxes or adding new fees, both of which would raise prices and potentially turn off consumers who are only now starting to return.

In Omaha this week, a group of at least four restaurant owners has banded together in an attempt to block a new tax on restaurant sales that’s slated to start Friday. The coalition hopes to win an injunction preventing the city-created tax from taking effect, arguing that the additional 2.5% fee on bar, restaurant and catering receipts is actually a sales tax, La Casa Pizzeria owner Nicole Jesse told the Omaha World-Herald; state law confers the power to create a sales tax on the Legislature alone. Restaurant owners told the newspaper that they worry about the extra costs involved in reprogramming their computers to calculate the new tax and, of course, they fear lost business when the price of a meal goes up.

Proposals in other parts of the country seek to tie together the sources and beneficiaries of the revenue more closely, although the fees would still mean higher taxes for restaurant operators and their patrons.

In Marlborough, Mass., city officials determined last year that the dismal economy made it a bad time to raise taxes on struggling restaurants and lodging establishments, despite the state Legislature’s OK. Now, the City Council is revisiting the issue of bumping the city’s lodging tax from 4% to 6% and adding .75% to the restaurant tax rate, as a way to increase funding to the city’s economic development agency and fund a full-time advocate to attract new businesses.

A proposal by San Francisco’s Board of Supervisors that would impose an “alcohol fee” on the city’s liquor distributors has raised similar objections among the city’s restaurants, which would see their alcohol bills rise under the plan. The proposal, which aims to raise about $16 million annually to fund health care and rehab services for problem alcoholics, is likely to die on the mayor’s desk if not before, the Chronicle reports.

Earlier this month, West Virginia highway officials proposed an additional 5% tax on quickservice meals, but only those purchased at drive-through windows. The fees — an estimated $50 million annually — would go to replenish the state’s depleted State Road Fund. While the “cheeseburger tax,” as one official dubbed the proposed fee, would make it cheaper for customers to walk into the restaurants to buy lunch, we haven’t yet heard any enterprising pro-tax legislators try to sell the proposal’s side effect as a weapon in the war on obesity.

Feeling overtaxed in your community? Tell us about it.

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