Middlesex County Meals Tax FAQs

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1 What is considered a meal that is subject to the Meals Tax? A meal is any prepared food or drink offered or held out for sale by a food establishment for the purpose of being consumed by any person to satisfy the appetite and that is ready for immediate consumption. What is the proposed Meals Tax rate in Middlesex County? The proposed Meals Tax rate in Middlesex County is 4 percent (4%) of the amount paid for prepared foods purchased in the County. Meals Taxes collected within the Town of Urbanna are paid to the Town. In fact,va. Code precludes the County from receiving Meals Tax Revenue from within the town since the Town adopted a meals tax first. When are Meals Taxes due to Middlesex County? The twentieth (20th) day of the month following the month in which the taxes are collected, or should have been collected, from the consumer. For example: Meals Taxes collected from consumers in January are due to be remitted to the County on or before February 20. Does the meal, or prepared food, have to be consumed on the premises of the business where it is purchased to be taxable? The meal, or prepared food, is subject to the Meals Tax whether it is intended to be consumed on the seller s premises or elsewhere and without regard to the manner, time or place of service. Does a caterer have to collect and remit Meals Taxes to the County? It depends. Yes, for a caterer whose business is located in the County of Middlesex, regardless of the place of service of the prepared food. No, if the caterer s business is located outside of Middlesex and that county does not have a meals tax. The Meals Tax is based on the locality in which the caterer is subject to the local business license (BPOL) tax. Code of Virginia, Are beverages such as soda, beer, water and others that are in a can, bottle or other factory sealed container subject to the meals tax? Alcoholic and non-alcoholic beverages sold for off-premise consumption in factory sealed containers are exempt from the Meals Tax under the proposed ordinance. What is considered a restaurant? A restaurant as defined by the proposed ordinance is: 1) any place where food is prepared for service to the public whether on or off premises; 2) any place where food is served to the public; or 3) any place or operation which prepares or stores food for distribution to persons of the same business operation of a related business operation for service to the public Example include; restaurants, dining room, grill, coffee shop, cafeteria, cafe, snack bar, lunch counter, lunchroom, short order place, tavern, delicatessen, confectionery, bakery, eating house, eatery, drugstore, catering service, lunch wagon or truck, push carts, or other mobile facility from which food is sold, dining facility in a public or private club, resort, bar, lounge or other similar establishment, convenience stores, theatres, ice cream/yogurt shops. Are there any exemptions to the Meals Tax? YES The following items, when served exclusively for off-premise consumption, are exempt from the Meals Tax: (1) Factory-prepackaged snacks including candy, gum, popcorn, cookies, chips, doughnuts, ice cream, crackers, nabs, and the like and items of essentially the same nature. (2) Food sold in bulk. (3) Alcoholic and nonalcoholic beverages sold in factory-sealed containers. (4) Any food or food product purchased with food coupons issued by the United States Department of Agriculture under the Food Stamp Program or drafts issued through the state

2 special supplemental food program for women, infants, and children. (5) Any food or food product purchased for home consumption as defined in the federal Food Stamp Act of 1977, 7 USC 2012, as amended, except hot food or hot food products ready for immediate consumption. The following items, whether or not purchased for immediate consumption, are excluded from the definition of food in the federal Food Stamp Act: sandwiches, salad bar items sold from a salad bar, prepackaged single-serving salads consisting primarily of an assortment of vegetables, and nonfactory-sealed beverages. Items (3), (4) & (5) are not affected by this item. The following businesses are not subject to the Meals Tax, except for any portion or section of the business that contains prepared food and beverage operations: grocery store supermarket convenience store The following purchases of food and beverages are exempt from the Meals Tax: (1) Food and beverages furnished by food establishments to employees as part of their compensation when no charge is made to the employee. (2) Food and beverages sold by day care centers, public or private elementary or secondary schools or food sold by any college or university to its students served on site and paid for as a part of a tuition, meal or similar plan. (3) Food and beverages furnished by a hospital, medical clinic, convalescent home, nursing Home, home for the aged, infirm, handicapped, battered women, narcotic addicts or alcoholics; or other extended care facility to patients or residents thereof and the spouses and children of such persons. (4) Food and beverages furnished by a public or private nonprofit charitable organization or establishment or a private establishment that contracts with the appropriate agency of the commonwealth to offer meals at concession prices to elderly, infirm, blind, handicapped or needy persons in their homes or at central locations. (5) Food and beverages sold on an occasional basis, not exceeding six times per calendar year, by a nonprofit educational, charitable or benevolent organization; church; or religious body as a fundraising activity, the gross proceeds of which are to be used by such organization exclusively for nonprofit educational, charitable, benevolent or religious purposes. (6) Food and beverages sold through vending machines. Are gratuities subject to the Meals Tax? The Virginia Code, , provides the following regarding gratuities: No such taxes on meals may be imposed on: (1) The amount paid by the purchaser as a discretionary gratuity; or (2) That portion of the amount paid by the purchaser as a mandatory gratuity or service charge added by the restaurant in addition to the sales price of the meal, but only to the extent that such mandatory gratuity or service charge does not exceed 20% of the sales price; or (3) Food and beverages sold through vending machines or on any tangible personal property purchased with food coupons issued by the United States Department of Agriculture under the Food Stamp Program or drafts issued through the Virginia Special Supplemental Food Program for Women, Infants, and Children. Do Businesses get a commission for aiding the county in the collection of the Tax? YES Any business that collects the tax may retain a commission of 5% of the total tax they collect to cover administrative costs associated with collection For example, a restaurant that collections $1000 in tax will be able to retain $50 for its administrative expenses.

3 How many times has the County attempted to have a Meals Tax Adopted? Four times including this one. This time 2013: The Board of Supervisor voted to send the matter to referendum at their August meeting Last time 2010: The referendum failed. Vote on the referendum was as follows. No 2, % Yes 1, % Total: 3,850 In 2005: The referendum failed. Vote on the referendum was as follows. No 2, % Yes 1, % Total: 3,619 In 1999: The referendum failed. Vote on the referendum was as follows. No 1, % Yes % Total: 1,729 What make this Meals Tax Referendum different from past requests? The previous referendums proposed that the revenues received simply supplement the County s General fund. The current referendum binds the majority of the revenue to fund emergency services, including fire and rescue services and much needed capital improvements for the county and schools. Why a Meals Tax? In recent years many citizens speaking at county budget hearings have asked the Board of Supervisors consider diversifying the county s tax sources and stop the county s over-reliance upon real estate and personal property taxes to fund county operations. How much will a Meals Tax cost me when I visit a local restaurant? Examples of the impact: Bill is $10.00 the meals tax is 40 cents for a total of $10.40 Bill is $20.00 the meals tax is 80 cents for a total of $20.80 Bill is $40.00 the meals tax is 1.60 for a total of $41.60

4 Where are Meal Taxes currently being collected? Anyone eating at Applebee s, Ruby Tuesdays, Pizza Hut, McDonalds or Chic-fil-a in Gloucester already pays a meals tax when eating out. Dollars Middlesex County Citizens spend eating out in Gloucester, King William, New Kent, James City, York, Kilmarnock, Tappahannock, West Point, and Williamsburg are supporting those communities through their meals taxes. Why is Middlesex holding a referendum on the meals tax? Before the Board of Supervisors can vote to have Meals Tax, Virginia law requires Counties to obtain voter approval through a referendum. Cities and Towns in Virginia may adopt a meals tax without holding a referendum. When would a meals tax take effect, if approved by voters? If voters decide on November 5th to authorize the county to implement a meals tax, the Board of Supervisors would still need to adopt an ordinance. This ordinance would set when the tax would become effective and other details. Legal requirements would be followed prior to implementation, including advertising the ordinance and holding a public hearing. What other Virginia localities charge a meals tax? 209 localities 125 towns, all 39 cities and 45 of the 95 counties have meals taxes. Currently, the following localities in our area have meals taxes: Caroline, Charles City, Dinwiddie, Gloucester, James City, King William, Louisa, New Kent, Prince George and York counties, the Towns of Urbanna, West Point, Warsaw, Kilmarnock, Tappahannock, and the cities of Williamsburg, Newport News, Hampton, Poquoson, Hopewell, Petersburg and Richmond. Why is a meals tax necessary? Currently, unfunded mandates and costly programs are being passed down to the local level by the federal government and the Commonwealth of Virginia. Without new revenue sources it will become harder to fund needed capital improvements and maintain current funding of other critical services without raising general property taxes. How do taxes in Middlesex compare to other localities? Overall, Middlesex residents have one of the lowest tax burdens in Virginia. Middlesex residents also pay one of the lowest real estate tax rates in Virginia.

5 Real Estate Tax on $200,000 Home Stafford Spotsylvania Richmond Prince William Middlesex Mathews Loudoun King William King and Queen Henrico Gloucester Fairfax Essex Chesterfield Arlington $500 $1,000 $1,500 $2,000 $2,500 $3,000 Locality Real Estate Tax Rate (per $100 assessed value) Tax on $200,000 Home Arlington $1, Chesterfield 1.04 $2, Essex 0.84 $1, Fairfax 1.07 $2, Gloucester 0.65 $1, Henrico 0.87 $1, King and Queen 0.52 $1, King William 0.79 $1, Loudoun $2, Mathews 0.47 $ Middlesex 0.48 $ Prince William $2, Richmond 1.2 $2, Spotsylvania 0.86 $1, Stafford 1.07 $2,140.00