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Article by Ken Trujillo on “Pandemic Hangover Coming for Restaurants and Municipalities”
In an article published on August 24, 2020 in Modern Restaurant Management, Chamberlain Hrdlicka shareholder Ken Trujillo discusses the revenue challenges restaurants and local governments are facing due to the COVID-19 pandemic. He also provides insight into how local governments have the authority to tax a variety of goods and services which directly impact restaurateurs and their providers. Additionally, Trujillo explains that Philadelphia became the first big U.S. city to pass a Beverage Tax in 2016 and provides lessons learned that can be applied to the current down market.
“Pre-COVID-19, Philadelphia has had an extraordinarily vibrant restaurant scene,” explains Trujillo. “And while Philadelphia became the first big U.S. city to pass a Beverage Tax in 2016, local operators have overcome the challenges of other taxes that have in many cases had greater impact. For example, the Liquor-by-the-Drink Tax is applied to the sale price of alcoholic beverages purchased at restaurants, bars, clubs and hotels was first imposed back in 1994 to help fund Philadelphia schools. The current tax rate is 10 percent and it currently generates more than $60 million per year.”
Trujillo further explains that revenue officials in some cities will seek to tax the restaurant industry, including charging license fees for outdoor spaces.
“Due to the social distancing requirements, many cities have allowed outdoor dining on sidewalks and other public spaces,” explains Trujillo. “Once the restaurant industry is healthy again, many will want to maintain the outdoor option. There is little doubt that revenue officials in some cities will seek to tax or charge license fees for that outdoor space. Similarly, political leaders will look around the country and borrow tax ideas such as Philly’s Liquor-by-the-Drink Tax or Beverage Tax.”
To view the full article, click here.