EagleTribune.com, North Andover, MA

May 17, 2013

N.H. restaurant industry fights business tax

Change of state's calculations would include compensation paid in tips to their employees

By Doug Ireland
direland@eagletribune.com

---- — A change in how the state calculates business taxes is making some restaurant owners nervous, afraid their profit margins will take a devastating hit.

That’s because the New Hampshire Department of Revenue is asking them to pay more under the business enterprise tax. The tax is based on the compensation paid to employees.

As of Jan. 1, the department has included servers’ tips when determining how much restaurants should pay.

The New Hampshire Lodging and Restaurant Association heard concerns from so many restaurateurs around the state, it decided to fight the collection, according to president and CEO Mike Somers.

Some restaurant owners saw their tax assessments double or triple, he said. Many restaurant owners received letters from the state, asking they pay four years of back taxes, Somers said. Those requests were later rescinded when his organization intervened, he said.

Four years ago, there were administrative rule changes that allowed the taxes to be based on tips, but they were not collected, Somers said. Tips had been exempt since the business enterprise tax was implemented in 1993.

The DRA sent Somers a letter in March, outlining the taxation of tips. No one from the department was available for comment yesterday.

“For all intents and purposes, this is a new tax for us,” Somers said.

The association, which represents approximately 700 restaurants and hotels, received support in its fight from Sens. Robert Odell, R-Lempster, and Jeb Bradley, R-Wolfeboro.

They drafted an amendment to House Bill 520, heard Tuesday by the Senate Ways and Means Committee, that would eliminate the change in collection. HB 520 has already passed the House and remains under review.

“We’re trying to change this,” Somers said yesterday. “Tips the employees receive always were exempt because it was not something paid by the business.”

At Janie’s Uncommon Cafe in Londonderry, co-owner Jane Tuerck is concerned.

She said it will increase her tax payment from $2,600 to $3,600.

“It’s definitely going to affect us and the bottom line,” Tuerck said yesterday. “For a small business like ours, it’s going to hurt.”

Another concerned restaurateur is Tom Boucher — owner of eight restaurants, including the T-Bones chain. T-Bones has restaurants in Derry and Salem.

Boucher said the change won’t affect his restaurants as much as many smaller businesses. But it’s certainly been a topic of discussion throughout the industry, he said.

“It’s a very contentious issue among all the restaurants,” Boucher said. “Most restaurants operate on pennies on a dollar as far as profit margins. This is going to hit them very hard.”

Boucher said the state is looking to boost its coffers at the expense of New Hampshire restaurants.

“Obviously, the state is looking for revenue and this is a way they are looking to get it,” he said.