Nearly 200 communities will collect meals tax in FY16

The local-option meals tax has gone into effect in 13 municipalities since the beginning of fiscal 2015, and four additional communities – Acton, Athol, Marshfield and Rockport – will have the tax go into effect in the first month of fiscal 2016.
 
By the beginning of fiscal 2016, 199 cities and towns – 56 percent of Massachusetts communities – will be availing themselves of the local levy, according to the Division of Local Services. New municipalities have chosen to adopt the tax every year since it became law in 2009.
 
Cities and towns that accept the provisions of Chapter 64L may begin to levy a local meals tax of three-quarters of 1 percent. The tax takes effect on the first day of the calendar quarter following 30 days after acceptance.
 
The meals tax only adds a small amount to the cost of a meal. On a $100 meal, for example, the tax amounts to just 75 cents. Overall, however, the tax can generate significant revenue for a city or town.
 
The local-option meals tax generated $97 million in municipal revenue statewide in fiscal 2014, according to the Department of Revenue, which collects the tax and then returns it to municipalities. So far, the tax has generated nearly $83 million in fiscal 2015.
 
Using data from the Division of Local Services, an MMA analysis finds that 270 communities could gain significant revenue – more than $5 per capita – from the meals tax. Of this group of 270, 186 communities (69 percent) have adopted the tax.
 
All of the communities that adopted the meals tax in the past year are expected to bring in more than $5 per capita per year (based on revenue estimates from fiscal 2014).
 
After a full year, Plymouth is estimated to generate $20 per capita in meals tax revenue, while Bourne will make $19 per capita. The city of Attleboro, which implemented the meals tax last July, is expected to bring in about $13 per capita each year. The town of West Bridgewater is expected to generate $38 per capita from the meals tax.
 
Many communities have discussed designating meals tax revenue for a specific project or department. Doing so gives taxpayers a better idea of where the funds are going – and in some cases can give taxpayers a more favorable view of a meals tax proposal.
 
Some municipalities have used meals or hotel tax revenue to reduce their “other post-employment benefit” liability by placing the revenue in an OPEB trust fund.
 
According to news reports, the Finance and Warrant Commission in Westwood recommended that meals tax revenue be used to address long-term financial needs, including pension liabilities and capital improvements. Attleboro planned to put its meals tax revenue towards schools. The city of Marlborough will use its meals tax revenue to improve local athletic fields and parks. Plymouth discussed using the revenue to fund local capital projects, such as a new town hall.
 
Several communities have debated the meals tax this spring.
 
The Westfield City Council recently rejected the meals tax as well as an increase in the motel tax. The city could have raised an estimated $370,000 per year from the meals tax, according to news reports.
 
Marshfield’s meals tax, passed by town meeting on April 28, will generate an estimated $500,000 per year, which will go to the town’s general fund.
 
The town of Adams will take up a meals tax proposal at town meeting in June. The tax would bring in about $80,00 to be put toward economic development.