The House of Representatives was poised Monday to get rid of an entertainment tax Gov. Dannel P. Malloy included as part of his $1.4 billion tax package.
The budget implementer eliminates the controversial cabaret tax, which would have added a 3 percent tax on customers who patronize venues where entertainment and music is performed, including restaurants. The tax was unpopular with owners of those businesses.
Rep. Tony D’Amelio, R-Waterbury, who owns Paisano’s Restaurant, said the tax would have negatively impacted his business. He said his restaurant provides music on Friday and Saturday nights. But when customers decide to come out on those nights they may or may not know there will be entertainment, he said. They certainly don’t expect a 3 percent tax on their meals because of it, he said.
“I think it’s so unfair that you go out to dinner with your family and you’re imposed with a 3 percent tax through no fault of your own. You just chose to go to an establishment that provides that kind of service,” he said.
D’Amelio said the tax would have kicked in as soon as the music started. There are also logistical concerns with the tax, he said. Most restaurants use a programmed computer system to ring up orders and calculate the appropriate taxes, he said.
He spoke to his IT staff and found there was no software to change the tax rate from the normal sales tax to a higher sales tax, he said. Instead, the additional tax would have to be manually added to checks whenever music is playing, he said.
“That’s going to be a nightmare for some places,” he said.
Rep. Linda Schofield, D-Simsbury, was also pleased to hear the tax had been removed from the implementer. She said the tax would have been difficult to implement and hard to audit if it were.
The language of the provision wasn’t always clear when it would apply, she said. As an example she used the Hartford Stage, a theater which occasionally features musicals, she said.
“On the night they have a musical do they suddenly become a cabaret?” she asked. “Because they do sell wine during the intermission. So suddenly they have to add 3 percent to that one play?”
Schofield said it’s also not clear whether the tax would apply to the Simsbury Performing Arts Center, which recently allowed an outdoor vender to sell beer and wine. Would a 3 percent tax now apply to people buying tickets to a symphony there, she wondered.
Given all the questions about when and where the tax would apply, it would be exceedingly difficult for the Department of Revenue Services to accurately audit, she said. How would they know that on certain nights, at certain places, alcohol was sold while entertainment was being provided, she said.
Nicole Griffin, lobbyist for the Connecticut Restaurant Association, said there was a similar tax proposed in 1998 and eight months after passage it was repealed because it was impossible to calculate.
She said the tax would apply to everyone in a restaurant that could hear the music, so if a two man band is playing in City Steam’s bar and it can be heard in the rest of the restaurant then there’s concern about who would pay the tax. At least one of her restaurant’s worried what this tax would mean for the mariachi band, which takes 30-minute breaks in between playing at various tables.
She said it also had an impact on musicians, many of whom play for tips and are not paid by restaurants. She said it’s likely many would be out of work if this legislation hadn’t been repealed. Schofield agreed it would have probably hurt Connecticut musicians, who would have a harder time finding work if restaurants were discouraged from having live music.
“We need to support those poor starving artists,” she said.
The tax was expected to raise $900,000 in revenue that would have been returned to the town of origin.
Jim Finley, executive director of the Connecticut Conference of Municipalities, said “we’ll miss the potential revenue, but we understand the difficulty in getting the tax to work at the local level.”
“In sum we regret the loss of revenue, but we understand,” Finley said.