Nearly half of Mass. communities have adopted local-option meals tax

Nine communities this spring adopted the local-option meals tax, bringing the total to 172 – or roughly half the communities in the state.

Following votes this spring, the tax will take effect on July 1 in Amesbury, Braintree, Grafton, Northborough, Rockland, Sandwich, Scituate, Ware and Weymouth.

Four years ago, the state authorized communities to add a local tax of three-quarters of 1 percent on restaurant tabs, on top of the 6.25 percent state meals tax. The additional municipal revenue has helped cities and towns to balance budgets and continue providing services as they have grappled with local aid cuts.

Over the four years, the local-option meals tax has raised a total of $238 million in revenue for the communities throughout the state that have adopted it, according to the Division of Local Services.

In Weymouth, the tax will generate an estimated $557,862 per year, and the town plans to use the funds for park and field maintenance, according to local news reports.

In Scituate, officials are discussing how to use estimated $200,000 the meals tax will bring to the community.

Northborough plans to use local meals and room tax revenues to lower property taxes this year. In future years, the revenue will be added to a trust fund for other post-employment benefits (OPEBs).

The additional $225,000 that Rockland earns from the tax may help to pay for a new senior center and road repairs.

In a 5-4 vote, Amesbury’s Town Council approved the meals tax, which will bring an estimated $200,000 in revenue, and established a new sidewalk repair stabilization fund.

After rejecting proposals in 2010 and 2011, Braintree’s town council voted, 6-1, to approve the meals tax, which will bring in an estimated $851,036 per year.

Some communities warm to the idea of the local-option meals tax after it has been adopted by surrounding municipalities. The meals tax has also been popular in communities that attract tourists.

Adoption of the local-option meals tax was most frequent in the first full fiscal year that the option was available, fiscal 2010, but additional communities have adopted the option each year since.

The Division of Local Services estimates the revenue that each municipality could receive from the local meals tax based on state meals tax revenue that is already being generated in the community. In fiscal 2012, $82.6 million was collected by municipalities through the local meals tax – 78 percent of the potential $105.8 million that could be raised if the tax were in effect in all communities. This percentage has increased each year with the inclusion of additional communities.

Using data from the DLS, the MMA estimates that 259 of the state’s municipalities could raise at least $5 per capita through the local meals tax. Of these 259 communities, 162 have adopted the tax (62.5 percent).

Municipalities that bring in the most revenue per capita are Provincetown ($160.97), Wellfleet ($68.06), Nantucket ($66.68), Lenox ($51.47) and Burlington ($49.66).

The towns of Cohasset and Holbrook recently rejected meals tax proposals. In Cohasset, business owners expressed concerns that additional taxes on meals and rooms could hurt small businesses.

The local meals tax does not increase restaurant bills significantly. On a $100 restaurant check, a customer would pay an extra 75 cents.

The maximum tax that can be enacted on meals in Massachusetts compares favorably to that in other New England states. Connecticut’s meals tax is 6.35 percent, followed by Massachusetts and Maine at 7 percent, then Rhode Island at 8 percent, New Hampshire at 9 percent, and Vermont at 10 percent.

For more information about the local-option meals tax, visit mass.gov/dor and mass.gov/dor/local-officials.