Rhode Island General Assembly

Office of the House Minority Caucus

 

Representative Rea Bill Sunsets RI’s Meal and Beverage Tax

 

State House, Providence – The impact inflation is having on full service meal prices, compounded with the state’s meal and beverage tax, may disincentivize patrons from dining out—this on top of the recent transportation hurdles Rhode Islanders are facing with the Washington Bridge closure. These circumstances are hurting businesses as well as local economies.

The sunset bill for the Rhode Island meal and beverage tax (H 7675), sponsored by Representative Brian Rea (District 53, Glocester/Smithfield), implements incremental decreases to the tax rate until it is eliminated, giving municipalities time to adjust to the reduction in revenues. The bill authorizes an annual 0.25% reduction of the local meals and beverage tax effective January 1, 2025; ending January 1,2029.

Local meals and beverage taxes are imposed on all prepared foods sold in the state and are administered and collected by the RI Division of Taxation. Currently the rate is 1% on a business’ taxable food sales gross receipts which is levied on top of the state’s 7% sales tax, and is filed monthly (an extra burden on small business owners in the food industry). When patrons go to a restaurant in Rhode Island they are paying 8% on their tab (unlike MA at 7% and CT at 7.35%). Though this may not sound like much, Rhode Island, along with the rest of the U.S., is currently facing exceptionally high inflation, with prices of food items alone increasing consecutively for the past two months and food away from home prices increasing year-over-year by 6%. Full service meals have increased in price by approximately 5.1% year-over-year.

With extreme increases in food costs, the recent overall inflationary burdens placed on Rhode Islanders, and the large percentage of employees supported in our food industry, removing the food and beverage tax in Rhode Island is not only responsible, but I would say, necessary,” said Representative Rea. The hospitality industry is still feeling the ramifications from the pandemic. We need this industry to be robust, especially in sustaining our local economies.

 

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