Senate bill proposes change in restaurant tax

Monica Kast

A bill to reform how Kentucky restaurants are taxed and how that money is distributed to Kentucky cities has been introduced into the Kentucky Senate.

Senate Bill 166 is an optional tax for Kentucky cities that, if passed, will change the way that restaurants are taxed.

Currently, restaurants pay a tax on their net profits, or gross receipts. The money from that tax is then given to non-elected officials, who distribute it to the tourism industry.

If Senate Bill 166 passes, the new tax would be consumption based and would allow the taxes paid from restaurants to go toward more tangible improvements to cities. It is limited to three percent, and would only be put into effect if a city voted to allow it, according to Senate Bill 166.

The money from the tax could be used for things such as construction, maintenance, or operation of tourism and economic areas in the cities of Kentucky.

Senator Jared Carpenter introduced the bill to the Kentucky Senate on Feb. 9. The bill was sent to the Appropriations and Revenue Committee on Feb. 11, according to the Kentucky Legislature website.

“Instead of turning this tax over, it allows city governments to return up to 75 percent of revenues and how they’re expended,” J.D. Chaney, the deputy executive director of the Kentucky League of Cities, said.

The Kentucky League of Cities provides “cities, leaders, and employees with a number of services including legislative advocacy, legal services, community consulting, training and online training, policy development and research, and more,” according to their website. Chaney described the league as an “association of city governments.”

Chaney said the League of Cities helped “write and get the bill introduced.”

“This bill gives direct oversight to city government,” Chaney said. “Instead of turning the money over to non-elected committees, it allows city government to retain up to 75 percent of revenues and how they’re expended.”

Chaney said that this bill would be beneficial for both small and large cities in Kentucky, and that “a lot of smaller cities have already enacted the tax.” Cave City has already put the tax into place and seen positive results, Chaney said.

“History has shown that if the money is spent in promoting the place it is earned…you actually see a greater deal of business at the restaurant,” Chaney said.

Kim Huntsman, the manager of Mellow Mushroom in Bowling Green, saw these new potential policies as beneficial for restaurants and tourism.

“If the money is going to tourism, I think that’s better,” Huntsman said. “More tourists mean more people and money and increasing the flow of business here, so that’s a major benefit.”

Huntsman added that she didn’t feel like there would be any major effects to the restaurant industry.

“I don’t think it will have a large effect,” Huntsman said. “A few people may slow down their eating-out habits, but I don’t think it will have a huge effect.”

Kentucky Senators Jared Carpenter and Paul Hornback, who co-sponsored the bill, were contacted for comment but did not respond before the time of publication.