Meals tax can eat into your budget

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by Sandra Parker

WVEC.com

Posted on May 25, 2011 at 5:39 PM

VIRGINIA BEACH -- When you go to a restaurant, whether you’re eating in or carrying out, you pay a meals tax.

How much is added on to the cost of that burger and fries or seafood platter depends on where you eat.

In Hampton, Newport News, Norfolk, Portsmouth and Suffolk, the city meals tax is 6.5 percent. In Virginia Beach, Chesapeake and Poquoson, it’s 5.5 percent.

That tax is coupled with the state sales tax, which makes the overall tax on meals in Hampton Roads higher than in New York or Los Angeles.

Where the city uses that money varies, too, although most put the money in a general fund.

"We use it to not only support general government operations but also special projects such as open space acquisitions, which we also know is important to our citizens," says Patti Phillips,the Director of Finance for the city of Virginia Beach.

It’s no surprise that the money from restaurant sales doesn’t necessarily help the restaurants.

Katie Hellebush with the Virginia Hospitality and Travel Association says, "If there were to be any sort of meals tax dedicated to tourism promotion that would be much more palatable to the restaurant association and hospitality in general."

"Originally the meals tax was passed because it was considered a luxury tax and it was a tax that was supposedly imposed totally on transient people, tourists coming to Va. Beach. That's flipped -- working families, two spouses working, so eating out is the norm these days," says Chris Savvides with Black Angus.

Now, almost 80-percent of all meals tax is paid by locals.

The tax also applies to some of the food and drink you pick up at grocery and convenience stores. For the most part, items that are hot and ready to eat, like a pizza or chicken, are subject to a meals tax.

When it comes to food that you have to heat up yourself like a take and bake pizza or even a frozen pizza you don't pay a meals tax on it.  Where it gets a little confusing is some cold foods you get at the store.  Burritos that you have to heat up aren't charged a meals tax. 

Now here's where it gets a little tricky. An item that you have to take home and heat up doesn't get hit with a meals tax, but a salad that's ready to go qualifies.

Also, drinks that you put a lid on and take with you also are subject to a meals tax.

Consumers are resigned to paying the price.

"I guess if I was going to 7-11 and getting a cold drink or something, that's not quite right. But if someone took time to make a chicken for me to take home, they're still doing that work so it makes sense, I guess, to some extent," says Rebekah Hall.

"I think that cities need revenue and this is probably a good place to get it. If I can afford a cup of Starbucks, I can probably afford to contribute a little bit to the local economy," adds Kevin Hirten.

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