Briefing: Restaurant Sales Tax Holiday
Massachusetts retailers are always pleased when the state decides to give them a holiday from charging sales taxes on customers’ purchases. Now legislators are considering extending the favor to restaurants as well.
What is being proposed?
The legislation would temporarily remove the state’s 6.25 percent meals tax for the week of March 20 through March 26. Local meals taxes of 0.75 percent that are levied by some municipalities would still be in effect. The idea was first proposed by David Andelman, CEO of Phantom Gourmet Inc., and has, unsurprisingly, been warmly embraced by restaurant owners.
What would it cost the state?
The Department of Revenue estimates the tax holiday would eliminate $11 million to $15 million in tax revenue that the state would otherwise collect that week. However, supporters say the state could offset a little of that loss with increased corporate tax collections from more-profitable restaurants.
What’s the history of the sales tax holiday?
The state’s first sales tax holiday, in which retail items that cost $2,500 or less are exempted from the state tax, was held in 2004 on a Saturday in August. In 2005, it was expanded to a full weekend. The holiday occurred annually since then, except in 2009, when state leaders said the budget crisis made it impractical. In 2010, the state lost $19.9 million in tax revenue due to the holiday, according to the Department of Revenue. That reflects $318 million in sales on taxable items over the weekend.
Who’s for the meals tax holiday? Who’s against it?
The bill was filed by Rep. Marc Lombardo (R-Billerica) and Senate Minority Leader Bruce Tarr (R-Gloucester). Within the first week of February, it had lined up 23 co-sponsors from both parties. Gov. Deval Patrick, who’s thrown his support behind another sales tax holiday this year, has so far not expressed an opinion on the meals tax idea.
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