For the second time in five years, the committee responsible for assembling Harvard’s annual budget is recommending that the town adopt a local tax on meals and other prepared foods to boost income for fiscal 2017.
The unanimous vote of the seven-member Finance Committee followed a discussion at their Wednesday, Oct. 7, meeting that lasted less than 10 minutes, with few questions asked and no objections raised.
If language to enact the tax is placed on the next Town Meeting warrant by the selectmen and approved by a simple majority of Town Meeting attendees next spring, customers will pay an additional 0.75 percent tax on coffee, sandwiches, pizza, and other prepared food purchased in town. The Massachusetts Department of Revenue (DOR) would collect the tax along with the state’s own 6.25 percent sales tax and return the money to the town. The new tax would add approximately one cent to the cost of a $1.95 cup of coffee, 13 cents to a $16.95 pizza, and 75 cents to a $100 meal. Town Administrator Tim Bragan told the committee last week that using DOR estimates, he and Finance Director Lorraine Leonard had concluded the tax would add approximately $25,000 per year to Harvard’s income.
Use of the optional tax was authorized by the Legislature in 2009 as a way to offset the drastic cuts in state aid to towns it had enacted at the height of the 2008–2009 financial crisis. The Legislature also authorized towns to collect a local tax of up to 6 percent on rooms rented for more than $15 per day, an amount that would be added to the state’s own 5.7 percent room tax.
Town rejected tax in 2010
This is not the first time the Finance Committee has recommended that Harvard adopt the optional meals tax. At its request, an article asking for voter approval was placed on the 2010 Annual Town Meeting warrant but was rejected by a majority of the approximately 100 citizens remaining for the vote. Fears that the tax would drive businesses to other towns and inhibit the growth of Harvard’s commercial district carried the day. At the time, none of Harvard’s neighbors had adopted the tax, and DOR had estimated that the levy would add $7,400 annually to town coffers. The levy was opposed by the Citizens for Limited Taxation and the Massachusetts Restaurant Association.
But times have changed. The Massachusetts Municipal Association (MMA), which supports the tax, reported in May that 199 cities and towns, or 56 percent of Massachusetts municipalities, had adopted the local meals tax, including the neighboring towns of Acton, Ayer, Groton, Littleton, and Shirley. The next-door towns of Bolton, Boxborough, and Lancaster, however, remain tax free, as does Devens, although MassDevelopment, which governs Devens, has elected to collect a 6 percent local room tax on guests at the development’s two hotels.
How a town chooses to use the additional income from a local meals tax is up to its voters. In its May report, MMA noted that many communities have used the tax to fund particular projects or departments, to pay for schools or capital improvements, or to add to an “other post-employment benefits” trust fund wherein money is set aside to pay the future benefits due town employees when they retire. Unless otherwise designated, the tax money would be added to Harvard’s general fund, helping pay for town spending, a use that the Finance Committee appears to favor.
Six businesses affected
If enacted, the tax would have to be collected by the six town businesses currently selling prepared food. They include Dunkin’ Donuts, Fruitlands, the General Store, Westward Orchards, Sorrento’s, and Siam Pepper. The tax would not be charged on food served to students in the school cafeterias.
“I don’t see it hurting anybody,” said committee member Bruce Nickerson at last week’s meeting. “From the restaurant’s point of view, all we’re doing is changing the tax that’s collected from 6.25 to 7 percent.
“A good chunk of that revenue will be from people who don’t live in Harvard,” said Chairwoman Alice von Loesecke.
The next step is for the Finance Committee to ask the selectmen to include an article on next year’s Annual Town Meeting warrant asking attendees to adopt the tax. If the selectmen honor the request and a simple majority of Town Meeting attendees approves it, the tax will become law.
