NM evaluates effectiveness of restaurant, bar tax holiday

In this file photo, food trucks operate across Paseo de Peralta near the Roundhouse. Lawmakers approved tax relief intended to help food trucks, restaurants and bars this year. (Eddie Moore/Albuquerque Journal)

Copyright © 2021 Albuquerque Journal

SANTA FE – A four-month tax holiday for New Mexico restaurants, food trucks and bars didn’t prove as lucrative as lawmakers hoped.

The unusual program delivered about $50.5 million in tax relief to food and drink establishments for sales from March to June this year – by allowing them to charge gross receipts taxes on food but keep the money.

The relief, however, fell far short of the $90.3 million the state had expected, according to the Taxation and Revenue Department.

It’s one example of the findings now under review by lawmakers as they evaluate New Mexico’s efforts to provide economic relief amid the COVID-19 pandemic.

In a hearing Thursday at the Capitol, legislators also heard that the state issued about $98.4 million in $600 rebates to low-income workers – much closer to state expectations – and about $34.6 million in emergency aid to renters.

Taxation and Revenue Secretary Stephanie Schardin Clarke said her department is still aiming to distribute more tax relief to restaurants – in part by publicizing the tax holiday and reminding eligible businesses that they can amend their tax returns to claim the deduction.

The unusual offer allowed restaurants to collect gross receipts taxes from customers during a four-month period but keep the money rather than surrender it to the state. They also had the option of not charging the tax at all.

Fast food restaurants weren’t eligible.

Carol Wight, CEO of the New Mexico Restaurant Association, said the timing of the legislation may have squeezed efforts to get the money out.

Senate Bill 1 was signed into law by Gov. Michelle Lujan Grisham in March, and the first tax filings eligible for the deduction were due in late April, Wight said.

“The turnaround time on that was very quick,” Wight said, “and it wasn’t easy to get the word out.”

But she said the restaurant owners who participated were grateful for the help.

The program didn’t involve as much paperwork as other relief programs, Wight said, and restaurants would welcome another tax holiday in the future, especially as concerns about the delta variant reduce demand for in-person dining.

Schardin Clarke said there are a host of potential explanations for the $50 million cost coming so far below the $90 million estimate. Restaurants may have been less busy, for example, than economists expected, she said.

The four-month holiday came before the state lifted business capacity restrictions July 1.

But Schardin Clarke said it’s likely some establishments didn’t take advantage of the offer to keep the tax money.

“It strikes me that there is relief left on the table,” she told lawmakers.

Senate Majority Leader Peter Wirth, D-Santa Fe, said it’s critical the state ensure that restaurants, food trucks and bars are aware of the program because they can still participate.

He estimated they have about three years to amend their tax returns and get the money back.

The pandemic “has just been brutal on our restaurant and hospitality industry,” Wirth said. “We were really trying to do something unique here to help.”

About 900 businesses a month claimed the gross receipts tax deduction, Schardin Clarke said.

Wirth was a co-sponsor of Senate Bill 1, along with Democratic Sens. Siah Correa Hemphill of Silver City and Jacob Candelaria of Albuquerque and House Majority Leader Javier Martinez, D-Albuquerque.

In a meeting of the Revenue Stabilization and Tax Policy Committee, legislators also were told the state has issued:

⋄ About $98.4 million in $600 rebates to people making $15 an hour or less, also part of Senate Bill 1. Nearly 164,000 rebates went out.

The state had expected to issue about $109.4 million in rebates, and Schardin Clarke said New Mexico may get close to that figure by the Oct. 15 deadline.

⋄ About $34.6 million in emergency rental and utility assistance out of about $185 million available.

Donnie Quintana, director of the Local Government Division in the Department of Finance and Administration, said New Mexico is on track to meet a requirement to obligate a certain amount of the money by Sept. 30, or risk having the funds swept back into the U.S. Treasury.

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