MMA urges Revenue Committee to raise cap on local-option meals tax

The Honorable Mark J. Cusack, House Chair
The Honorable Adam G. Hinds, Senate Chair
Joint Committee on Revenue
State House, Boston

Dear Chair Cusack, Chair Hinds, and Distinguished Committee Members,

On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association appreciates the opportunity to offer testimony in strong support of S. 1703, legislation filed by Senator Jason Lewis and others to allow cities and towns to make a local-option decision to increase the local sales tax rate on meals to 1.5 percent. The total maximum state-local rate on meals would be 7.75 percent, including the 6.25 percent state rate and the new 1.5 percent maximum local rate.

The meals tax rate in Massachusetts is below average in New England, where rates run from a low of 6.35 percent in Connecticut, to 8 percent in Maine and Rhode Island, 9 percent in New Hampshire, and 10 percent (meals) and 11 percent (alcohol) in Vermont. These New England rates include all local taxes that are levied. Rates outside of the Northeast also regularly exceed rates here in Massachusetts, including local meals taxes in cities and towns that compete for tourism. In Nashville, Tennessee, for example, the sales tax on meals is 9.25 percent and the tax on most alcoholic beverages served in a bar or restaurant is 24.25 percent (the sales tax plus a 15 percent Liquor by the Drink tax.)

Since 2009, when the Legislature granted cities and towns the authority to adopt a 0.75 percent sales tax on meals, the local legislative bodies in 239 municipalities have voted to do so. This includes the great majority of cities and towns where the tax would result in significant revenue. In fiscal 2018, $134 million was collected by the Department of Revenue and transferred to municipal treasuries. This revenue has been essential in protecting and preserving essential municipal and school services since the Great Recession. With Unrestricted General Government Aid still more than $200 million below fiscal 2008 levels (without adjusting for inflation), this expanded local revenue source would help communities deliver key services to residents and businesses while reducing reliance on the overburdened property tax.

Passage of S. 1703 would simply provide cities and towns with the option to make a locally based decision to increase their local sales tax on meals from 0.75 to 1.5 percent, and would still keep the overall Massachusetts rate far below the average in this region of the nation.

Thank you very much for the opportunity to submit testimony in support of this important legislation. If you have any questions, please do not hesitate to have your staff contact MMA Legislative Director John Robertson at 617-426-7272 at any time.

Sincerely,

Geoffrey C. Beckwith
Executive Director & CEO