Meals Tax Pits Town V. Town
Photo/Brandon Butler
Arnold Villatico, owner of Periwinkles Bar and Grill in Oxford, has an electronic sign thanking the town of Oxford for not adopting a local option meals tax.
Arnold Villatico’s restaurant straddles the Auburn-Oxford town line on Route 20, but he’s thankful he pays his local taxes to Oxford, not Auburn.
Auburn has adopted a local options meals tax, which increases the tax on prepared food from 6.25 percent to 7 percent. Because Vellatico’s Periwinkles Bar and Grill is technically located in Oxford, which has not adopted the tax, Villatico doesn’t have to charge customers the extra 0.75 percent tax.
Villatico is so happy he’s even got an electronic sign outside his restaurant thanking the town of Oxford for not implementing the tax.
“It’s not a thank you from me, it’s a thank you from the residents, the hard working people who come to my restaurant, because they’re the ones getting hit with this,” he said.
Home Rules
The local option hotel and meals taxes, which Beacon Hill lawmakers allowed communities to institute earlier this year, have created a schism between businesses and community leaders.
During town meeting season this fall, and in the face of possible deep state budget cuts in the future, more and more communities are adopting the taxes.
As of mid-November, the state’s Department of Revenue has recorded 49 communities that have adopted the meals tax and 46 communities that have adopted the occupancy tax, which increases the maximum a community can tax hotel and motel rooms from 4 to 6 percent.
Individual communities decide if they will implement the supplemental taxes, and, if adopted, the extra money stays in that community.
Some community leaders said they’re extremely thankful the state gave communities the option to raise their own revenues.
“I think it’s important to consider reasonable alternatives to the property tax,” said Julian Suso, town manager in Framingham. “With significant cuts in local aid, this is one of the offsets that was provided by the state to allow communities a little more control over their own destiny.”
But many business owners are frustrated by the tax because the meals option is not just for restaurants — it applies to any business that serves prepared food, including catering companies. Derek Grillo, one of the owners of Worcester-based Struck Catering, said since the city adopted the tax, they have to charge all of their customers the increased tax, even if the event they are catering is in a community that has not adopted the tax.
“It’s kind of difficult to explain to someone outside the city that they’re paying a local tax to Worcester,” Grillo said.
Worcester Attorney James Donnelly Jr., with the law firm Mirick O’Connell, said catering companies are somewhat caught in the middle of the new regulations.
“Traditionally, the power to tax is based largely on geography,” Donnelly said. “The challenge is when one location decides to increase their taxes but another does not, that provides an incentive for the taxpayer to go to a different location.”
Donnelly provided the example of consumers traveling to New Hampshire to purchase items without a sales tax.
“It’s bringing that idea to the local level,” Donnelly said.
Grillo said the issue could have been avoided if the tax were instituted statewide.
“It ends up pitting communities and businesses against each other,” Grillo said.
Lt. Gov. Tim Murray said state officials increased the sales tax from 5 percent to 6.25 percent then gave local communities the option of raising their own revenues.
“This is about empowering local officials who are on the ground-level,” Murray said. “These local decision makers are the best ones to determine what the local landscape is, when these measures are appropriate and what the impact will be.”
Shrewsbury Town Meeting members approved the local option taxes earlier this month, which will allow the town to begin collecting an estimated $244,000 in additional revenue starting in January.
Town Manager Daniel Morgado said he thinks the real impact on businesses was when the state raised the sales tax from 5 percent to 6.25 percent. He said the additional 0.75 percent is minimal.
Morgado said the state’s fiscal situation and possibly making cuts to local aid payments next fiscal year was a major driving factor when considering adopting the taxes.
“It’s a defense mechanism to these state cuts,” he said.
While some communities in southern Worcester County have adopted the tax, few in northern Worcester County have taken on the taxes.
Leominster Mayor Dean Mazzarella said he considered proposing the local option taxes, but he has resisted the temptation of some extra revenue.
“It’s a struggle out there, for everyone, restaurants, too,” Mazzarella said. “So we’re going to continue to try to operate within our existing means.”
Mazzarella said it could be a benefit to his community and others in the north county if other cities and towns in the region adopt the tax.
Fitchburg Mayor Lisa Wong said with the city facing possible multi-million budget shortfalls next year, she’s looking for bigger-ticket items to solve the budget crunch, rather than the couple hundred thousand dollars the city could receive from the tax.
The state estimates Fitchburg could see about $283,000 in revenue with the new tax.
But Wong said businesses could begin losing money if the tax is installed, decreasing the amount of taxes coming into the city.
Wong said the state government could do more to give communities more autonomy, such as allow community leaders more authority in negotiating health care plans for unions, and changing the way pensions are given out by the state.
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