RESTAURANT TAXES: WHO WILL PAY?

A subcommittee reviewing Cape Girardeau's hotel, motel and restaurant tax devised a new definition of restaurant and suggested changes in the tax ordinance for caterers and tax-exempt organizations.

The subcommittee met Tuesday afternoon with city attorney Eric Cunningham to discuss their concerns with a proposed revision in the tax that is tentatively slated to go before Cape Girardeau voters in April.

Subcommittee members say they want to make sure the tax is being levied fairly.

Defining who's liable for the restaurant tax has proved tricky.

The ordinance now in effect says the 1 percent restaurant tax will be assessed against any "inn or establishment engaged solely or chiefly in the sale and serving of meals or lunches, where table or chairs are provided for the customers."

But as it's written, the current ordinance doesn't affect convenience stores or grocery stores which may sell ready-to-eat prepared foods such as sandwiches or fried chicken, establishments that only serve dessert or snack items, such as ice cream and pizza delivery businesses that don't have dining areas or other establishments that serve food but don't have tables and chairs inside for customers.

A revision presented to the Convention and Visitors advisory commission last week changed the definition of restaurant to "any inn or establishment engaged in the retail sale of food prepared on the premises and sold for consumption within or away from the premises."

But the phrase "prepared on the premises" confused some members of the tax subcommittee, because in some cases, prepared foods carried out of a store frozen would not be subject to the restaurant tax, but those same sandwiches heated up on premises would be subject to the tax.

The phrase also would exclude caterers who bring meals already prepared to event sites.

So on Tuesday, the subcommittee redefined restaurant to include "any inn, establishment, person or entity engaged in the retail sale of food prepared on or off the premises and sold for consumption within or away from the premises."

Dennis "Doc" Cain, a member of the CVB board and restaurant owner, suggested the definition.

Food that is prepared on the premises will include food heated, assembled or served, under the new definition.

Bob Drury, a hotel and restaurant owner, indicated he is particularly concerned about prepared foods offered for sale at convenience and grocery stores.

More and more shoppers are picking up prepared foods at the supermarket, he said, a trend reflected in grocery sales.

"I'm looking 10 years down the road," he said.

The newly revised proposal will be presented to the full advisory board for consideration at a special meeting Dec. 4.

The board can make a decision to recommend approval or rejection of the proposal. The City Council will have the final say.

In order for the change in the ordinance to get on the April ballot, the council must approve the measure on the first reading by the Dec. 15 City Council meeting.

At the request of board members, Cunningham also agreed to research whether the tax can be applied to out-of-town caterers working events inside the city limits.

It may be necessary for the city to issue those caterers temporary merchants licenses in order for the tax to be assessed, Cunningham said.

He will also research how to include a stipulation that the city's 3 percent hotel tax will not be assessed against tax-exempt organizations, such as the state and federal government, schools and some church organizations.

Hotels and motels are now being required to assess that tax, said Drury, "and if (guests) won't pay it, we have to."

"And if we don't collect it, we get it audited," added Randy Kluge, who works in the hotel business.

State law stipulates that governmental agencies, schools and church groups are tax-exempt, but the city ordinance does not accommodate that exemption, Kluge said.

Recognizing the exemption might cost the city $3,000 to $3,500 a month in hotel and motel tax revenue, he said local hotels and motels would be able to compete for more business and draw more people into the city, which would generate other revenues to make up for the lost taxes.

"We're not here to collect money," said Walt Wildman, a member of the advisory commission. "We're here to get people to come into town."

Members of the subcommittee said they are still concerned about enforcement of the restaurant tax.

A report released earlier this year showed some restaurants weren't collecting the tax -- some because they had never been notified they had to.

Another change in the tax ordinance would remove an exemption for hotels with 8 or fewer bedrooms -- meaning bed and breakfast establishments would be assessed the tax.

Another revision makes "Meals on Wheels"-type programs exempt from the restaurant tax and exempts hospitals, nursing homes and convalescent centers from assessing the tax on meals served to patients or residents.

However, restaurants located within hospitals -- such as Lacey's on the Hill at Southeast Missouri Hospital -- would have to collect the tax.

At the end of October, the city had collected $473,823.61 in restaurant tax funds and $265,706.57 in hotel/motel tax funds.