Meals tax up, restaurant sales down in Williamsburg

City CFO says taxable revenue dropped 1.5% in the first four months of increased city meals tax.

It’s June 12. Restaurant patrons spent less in Williamsburg restaurants since the meals tax increased to 6.5%. Child Development Resources dedicates its new $15 million headquarters to serve children and parents. Groundbreaking next week on Williamsburg African American Heritage Trail.

Taxes bumped up our recent restaurant meal by 13.5%

When James City County discussed raising its meal tax by 50%, and restaurateurs protested, Vice Chair Ruth Larson asked if there was any data showing how raising the meals tax has impacted Williamsburg. She may now have an answer.

Williamsburg City Council learned Thursday that while its meals tax revenue grew by 6.7% through April from the prior year, restaurant revenue has decreased by 1.5% once the tax increase is factored in. April was down 22% from the prior year.

The city raised its meals tax from 6% to 6.5% in January. That is an increase of 8.33%, and if meal spending had remained unchanged, the city’s tax revenue should have increased by the same percentage.

At the time the increase was voted in, restaurant owners protested the additional tax — on top of rising prices for food and labor — would drive customers to spend less.

Barbara Dameron, the city’s chief financial officer, said there were still delinquent tax payments the city is trying to collect. But she cautioned the city may have overestimated how much it would receive in the first year of higher meals taxes.

“I hope I’m wrong, but we could be under by $300,000 to $350,000” from their expectations for the year, she said. The fiscal year ends June 30.

James City County and York County both voted this year to increase their meals taxes by half, from 4% to 6%.

County officials argued that much of the tax would be paid by tourists, and the millions in projected revenue increases would diversify their tax base.

Restaurant owners pushed back. A spokesperson for the Williamsburg Area Restaurant Association, representing 113 restaurants, told us some members estimate as many as 65% of their clients are locals.

Several restaurateurs who operated in the city told James City County that Williamsburg diners were cutting back on spending, skipping drinks or desserts.

That meant lower meal tabs, and lower tips for servers, the restaurateurs said.

Between state sales tax and the local meals taxes, restaurant patrons are now paying nearly 14% in taxes to dine in the city.

Tracy Wainwright, the James City County supervisor for the Powhatan district, voted against raising the county tax because she said it would hurt local families. When her family of six goes out to dine, Wainwright added, taxes mean “we are paying for a seventh meal…it’s a significant hit.”

After hearing the report from the city CFO, Williamsburg Mayor Douglas Pons quipped, “I’ll certainly start eating out a little bit more.”