Local restaurateurs wary of tax plan

If diners are going to pay a higher tax when they go out to eat in Greenwood, then that money should be used to bring more business into the city, restaurant owners said.

A proposal at the Statehouse would allow a new 1 percent local food and beverage tax in Greenwood, with the money going to pay for police, fire, parks and trails. That has raised some concern with local restaurant owners, who say the money should instead be spent to promote economic development.

“We are for public safety, and we appreciate everything that they do for us; but there should be other places to do a tax than just restaurants,” said Jeff Smith, president of Brackett Restaurant Group, which owns Greenwood’s Stacked Pickle.

Under the proposal, Greenwood would be allowed to charge its own food and beverage tax of up to 1 percent. That amount would be charged on restaurant bills, on top of the state’s 7 percent sales tax and the 1 percent food and beverage tax diners already pay in all Johnson County restaurants. The city would collect about $750,000 in its first year and $1 million the second year, said State Rep. John Price, who sponsored the bill.

The proposal and a second bill that would allow other cities and towns to collect a local food and beverage tax have been assigned to a committee but have not been given a hearing.

The bill calls for the money collected to be spent on public safety and city parks. The added tax would allow the city to hire more officers, give more money to the fire department and pay for projects to upgrade park facilities, Greenwood Mayor Mark Myers said.

Money from the new tax would replace funding the city loses to property tax caps, which restrict how much money the city can collect each year. This year, the city is losing out on $835,000 due to the property tax caps, Myers said.

Restaurant owners don’t think they should be charged a higher tax to pay those costs, and they worry about the impact that could have on their business.

Targeting restaurants is not the way to solve the city’s problems, Smith said. Having an industry-specific tax is not fair, especially since the tax will not spur economic development or industry growth, he said. The Stacked Pickle has five locations across three counties, so Smith sees the difference in taxes from location to location.

“In my opinion, that’s a poor tax policy,” Smith said.

The sales tax for the state is set at 7 percent, but Marion County has a 2 percent food and beverage tax that is included on every customer’s bill. When residents from Fishers or Carmel come to dine at a Johnson County restaurant, they are pleasantly surprised to see a lower tax rate here, Cannoli Queen of Greenwood owner Lisa Snow said.

If the food and beverage tax were increased in Greenwood, one restaurant manager is concerned that bigger businesses would choose to go out to eat elsewhere.

Bigger groups of people, such as hospitals and investment companies, dine at Stone Creek Dining on State Road 135, said David Carpenter, who has been the Stone Creek Dining manager for four years.

On larger orders, like catering, a $250 bill would be charged an added $2.50 with a new food and beverage tax, on top of the $20 tax they already pay. If customers see that added tax on the bill, they could choose to eat outside the city, he said.

“That could swing the venue choice,” Carpenter said. “In my point of view, it shouldn’t be the restaurant industry that has to collect that.”

For Snow, customers already make decisions based on how much they will pay in tax. With an additional 1 percent tax, she worries customers will reconsider where they dine, she said.

“I just don’t think it’s fair to consumers, and it’s definitely not fair to small business owners,” she said. “It does hurt our bottom line.”

Other restaurants say the tax increase is likely inevitable, including Jockamo Upper Crust Pizza general manager Josh Smith. Smith lives on the east side of Indianapolis, so he already pays a higher tax there, he said.

Jonathan Byrd’s also is used to the higher tax rates, since its company caters in more cities than just Greenwood, said chief operating officer Kevin Manship.

“We cater all over the state, and we see these taxes all the time, so I have no objection to it,” Manship said.

Every other county and city that the Jonathan Byrd’s works with has a tax like this in place, Manship said. Plus, customers are not likely to consider the tax of their meal when choosing where to eat, he said.

“When you looked at the food that you were buying, have you ever looked at the tax?” he asked.

About the legislation

Here is a look at the proposed legislation that would allow Greenwood to charge its own food and beverage tax:

What: Greenwood would be able to charge a 1 percent food and beverage tax on meals inside the city.

Where the money would go: The money raised from the tax would be split between public safety and parks in Greenwood.

Where it stands: State Rep. John Price’s proposal was assigned to the House Ways and Means Committee. The next step for the bill is to get assigned a hearing, but no hearing has been scheduled yet, Price said.