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1 Jared Walczak, Punching the Meal Ticket: Local Option Meals Taxes in the States 1 (2017)

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TAXO
FOUNDATION

FISCAL

FACT
No. 538
Jan. 2017


Punching the Meal Ticket: Local


Option Meals Taxes in the States


By Jared Walczak
    Policy Analyst


Key Findings

    Meals taxes are special taxes that apply to purchases of prepared foods for
    immediate consumption, and not just to meals eaten in a restaurant. They do not,
    however, apply to groceries or other non-prepared foods.

    Twenty states and the District of Columbia authorize meals taxes. Of these, 17
    exclusively authorize local option meals taxes, one imposes a state meals tax and
    provides for local option meals taxes, and three only collect meals taxes at the
    state or District-wide level.

    Three states require voter approval to adopt meals taxes, while sixteen states and
    the District of Columbia levy meals taxes statutorily or permit localities to adopt
    them by ordinance. Rates are typically, but not always, capped.

    Meals taxes introduce complexity, place local restaurants at a competitive
    disadvantage, and fail the benefit test of public finance, where the cost of a tax is
    incurred by those receiving the services funded by that tax.

    Voters frequently reject meals taxes when they are placed on the ballot.


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