Restaurant owners in Alexandria, still unhappy over the recent rise in the city meal tax, could face the prospect of another increase if a plan being considered by city staff to levy the meal tax against alcohol sold in restaurants is judged legal by the Virginia State Supreme Court.
The City of Virginia Beach is appealing a circuit court decision last year that ruled cities could not levy the meal tax against alcohol. Virginia Beach Assistant City Attorney Mark Slaughter said the Supreme Court should decide within the next month whether to hear the appeal.
If the case is heard and Virginia Beach wins, Alexandria's Deputy City Manager Bradford Hammer said, the Alexandria City Council "would look at it very seriously."
The Alexandria City Council in June approved an increase in the meal tax from 1 to 3 percent, on top of the state meal tax of 4 percent. Hammer said the increase will mean about $1.3 million in new revenue for the city. If Alexandria could legally extend the meal tax to alcohol, the city would net $150,000 to $200,000 more in revenues. Counties are not allowed to levy a meal tax in Virginia.
But local restaurant owners, unhappy about the tax increase that went into effect July 1, said they would be even less happy about extending the tax to alcohol.
"The nerve of them," said Lyle Good, manager of the Alexandria Casa Maria. "I would be very much against it, and there would probably be a protest."
Good said 60 percent of his restaurant's proceeds came from the sale of alcoholic drinks. And he said he is afraid taxing alcohol would dampen sales.
Last year, for example, an Alexandria meal for two costing $30 for food and $10 for drinks and wine would have been taxed $1.50, with only 30 cents going to the city. With the rise in the meal tax, the same meal would now be taxed $2.10, with 90 cents going to the city. And if the tax is extended to alcohol, the meal would be taxed $2.40 with $1.20 going to the city.
Hammer said he questioned, however, whether the proposal would dampen sales.
"Analysis shows that with such a tax increase there is usually a slight regression for the first quarter but then people forget they are paying a few cents more," Hammer said.
"In Alexandria, most of our restaurants are quality restaurants and the patrons are not the type of people to dither over another 30 cents."
Robert Arthur, manager of the Dixie Pig Barbecue, however, said that for less-expensive restaurants the rise in the meal tax usually made for a lot of trouble.
"People are angry they have to pay this tax and many have asked questions," Arthur said. "Maybe we are just priced so low people notice." Arthur said an average lunch of barbecue and beer would cost about $4 a person in his restaurant.
"That would be terrible," Arthur said. "It would hit the small businesses the hardest."