Most states are facing enormous fiscal challenges and, to create needed revenue, some are looking at taxes that will have an impact on restaurants.

“Like so many states, the Colorado legislature is looking for any, and all, ways to compensate for its tremendous budget shortfall.”
– Pete Meersman, president, Colorado Restaurant Association

Pete Meersman, president, Colorado Restaurant Association, notes that the state has recently repealed the sales tax exemption on most packaged goods used for carryout orders. (Colorado restaurateurs will now pay sales tax on the purchase of “non-essential” packaging, e.g., napkins, straws, bags.) Colorado also repealed the “Utilities Sales Tax Credit,” so restaurateurs no longer get a 55% sales tax deduction on the utilities they use to process/prepare food . . . Patrick Conway, president/ceo, Pennsylvania Restaurant Association, says the governor hopes to completely revamp the state “sales and use” tax in Pennsylvania, reducing it from 6% to 4%, while extending the tax to cover a list of 74 items and services that are currently exempted (including accounting, advertising, legal, and gratuities) . . . . According to Rob Gifford, president/ceo, Michigan Restaurant Association, the governor of Michigan is proposing to reduce the sales tax on restaurant meals from 6 to 5-1/2%, but apply the 5-1/2% sales tax to all services.

Twenty-four states now borrow from the federal government to cover unemployment benefits. It’s estimated that by mid-2010 this number will grow to 40 states. Employers in 36 states face unemployment insurance tax increases ranging from a few dollars to nearly $1,000 per worker in 2010. Even states like Tennessee – which is not currently borrowing but is experiencing massive outflows from its unemployment insurance funds – are pursuing unemployment insurance tax increases. Connie Vickery, government affairs director, Indiana Restaurant Association, says, “Last year we were able to lower unemployment insurance rates, using National Restaurant Association data showing that restaurants pay more to the pool than they take out. This year unemployment insurance rate increases were considered, but not officially proposed. We’re expecting increases to come up again in the 2011 session.”

At the moment, Chicago is the only major city with a sugary drinks tax – a flat 3% of the cost of the bottle or can. However, sugary drink taxes are being proposed in Philadelphia and Pittsburgh – two cents per ounce, including fruit juices. New York and California are considering an excise tax on soda and other sugar-sweetened drinks that would be imposed at different rates on syrups/simple syrups, bottled soft drinks, and powders or base products, to be paid by all those who purchase these products.