Beast and Bottle’s owners know they could never sell enough take-out chicken pot pies to reap the full benefit of a new sales tax relief proposal that Colorado lawmakers are serving up for next week’s special legislative session.
Under the coronavirus relief plan crafted by Democrats, restaurant owners would get to keep up to $2,000 per month in sales taxes owed to the state, according to details of the proposal described to The Colorado Sun. The state sales tax is 2.9%, so that means a restaurant would have to bring in about $70,000 per month to get the full $2,000 benefit.
And now, in the worst of the pandemic, when restaurants in 21 Colorado counties have been ordered to end indoor dining and stop serving alcohol by 8 p.m., that kind of money isn’t even close to a possibility for most independent restaurants.
Though she’s grateful for any financial help while restaurants “are just grasping to stay afloat right now,” Beast and Bottle owner Aileen Reilly said it would help a lot more if the sales tax relief was part of a larger proposal.
“I don’t think this is enough,” said Reilly, who with her brother owns Beast and Bottle and the southern Italian restaurant Coperta in Denver’s Uptown neighborhood. “If this is in a list of many things they are doing to help us, then that makes sense. But if this is the star, I would be terribly disappointed.”
As of now, the tax relief bill is the big idea on the table for restaurants when the legislature begins its coronavirus special session on Monday. Called back to work by Gov. Jared Polis, lawmakers also will consider bills that would help small businesses in general, including through direct payments.
The legislature is trying to act in lieu of federal action, but the state only has so much budget capacity to help. The aid package lawmakers are expected to debate during the special session totals about $200 million.
The congressional CARES Act, by comparison, totaled $2.2 trillion in assistance for the nation when it was passed in March. Colorado received $1.67 billion from the CARES Act.
The expectation is that the tax break will begin sometime in December and last about four months, said Senate Majority Leader Steve Fenberg, a Boulder Democrat. There will be some limitations.
“You can’t be a chain and have 20 restaurants and you get the sales tax (break) for all 20 of your restaurants,” Fenberg said, citing one example.
Fenberg said the relief to restaurants is forecast to equal about $50 million across Colorado. How much restaurants save in monthly tax payments depends on how much they sell. For instance, a restaurant that makes $30,000 in monthly revenue would get a tax break of $870.
“Restaurants making below $70,000 will also benefit, as they’ll get to keep whatever sales tax is collected, even if that’s just $1,000 or $1,500,” said Sonia Riggs, CEO of the Colorado Restaurant Association. “Is that going to save a restaurant from the brink? Probably not. But that extra cash may allow a restaurant to pay a portion of their third-party delivery fees, upgrade their contactless payment, or heat their patio – so it definitely has potential to be very helpful.”
Fenberg is hopeful that local governments will follow suit and provide sales tax relief of their own. Denver’s city sales tax, for instance, is an additional 4% for food and beverages sold at restaurants. In Aurora, that rate is an additional 3.75%.
“We’ve had conversations with municipalities who are interested in this program, but local government budgets are also under immense strain right now,” Riggs said. “We’re encouraging them to do anything they can, even if it seems small to them. We are hopeful that many local governments will do what they can for their restaurants, even if that’s not a full match of the tax break.”
The proposal is worth maybe $145 per week to Sean Kenyon, owner of the upscale speakeasy Williams & Graham and its hip little brother, the Occidental Bar. And that’s not nearly enough to rescue his Denver restaurants from this horrible year.
“That’s a very difficult blow. I’m stricken and heartbroken that that’s our relief,” Kenyon said Monday, as he pulled his car off the road upon hearing about the proposal. “They pulled the legislature into session for that? If they think that is throwing us a lifeline, it’s not. That’s like a thread rather than a rope.”
Williams & Graham is shut down. The Occidental is open for outdoor dining but must stop serving drinks by 8 p.m. And the staff of once more than 30 is now down to just four people, including a chef who makes the bar’s ever-popular chicken tenders and flatbread pizzas for takeout orders.
There’s no way the operation would reach the max benefit of $2,000 per month, which would require Kenyon to bring in about $70,000 per month. Last week — before the latest restrictions that banned indoor dining and alcohol sales past 8 p.m. — Kenyon brought in about $11,000. Now, he thinks he’ll be lucky to clear $5,000 per week.
Providing relief based on sales is of little help to restaurants that are losing money to stay open, he said. And it’s of no use to restaurants that have already shut down.
“That’s not relief,” he said. “That’s putting a death knell on the restaurants that are remaining.”
Kenyon said he is in full support of keeping people safe during the pandemic and that his restaurants have gone above and beyond the public health requirements, wiping down surfaces every 15 minutes and refusing service to customers who won’t wear a mask. But the government’s communication about restrictions has been inadequate, he said, providing little notice for restaurant owners to prepare.
Kenyon said he has listened in on Colorado Restaurant Association virtual meetings with Gov. Jared Polis’ economic team, but that restaurant owners are not allowed to speak and can only put questions in a chat box.
“If it’s not a question they want to hear, they don’t answer it,” he said.
Fenberg, the No. 2 Democrat in the Colorado Senate, said the tax relief is just one way lawmakers intend to help restaurants during the special session. The legislature is also planning to provide at least $55 million direct cash assistance to small businesses in areas of the state where there are capacity restrictions. Restaurants will be included, though they’ll be seeking the money alongside many other businesses.
Fenberg, a bar owner himself, said the idea is to ensure restaurants and bars that have shut down and thus can’t benefit from the sales tax relief will still get some aid.
“My business, we’re closed,” he said of his Bread Bar in Clear Creek County. “We’re not even trying to be open right now because of the capacity restrictions. We would lose more money by opening. We’re basically just paying basic overhead. For a business like mine, I’d rather get a $5,000 check instead of $2,000 in sales tax retention because I’m not actually making any sales.”
The hope is that the tax relief, combined with the direct payments, can make a real difference.
It’s not clear exactly how much each business will be eligible to receive, as the details are still being worked out. But the plan is for the payments to be proportional to a business’ size. There will be some kind of cap on the payments, though it’s not clear how much.
“Restaurants have said since the start of the pandemic that what they need most is cash and capacity,” Riggs said. “Given that capacity is severely restricted statewide, that makes cash even more important – and every little bit helps.”
That said, Riggs says what’s really needed is “meaningful cash relief from the federal government.” She estimated that 25% of restaurants that are still operating could close within a month and 60% within three months.
“State and local governments are doing what they can, but only the federal government can provide a package large enough that will give our restaurants the best shot at making it to the other side of this crisis,” she said.
Fenberg said the policies passed during the special session won’t be the last word. Lawmakers will continue working on legislation to aid restaurants, bars and other businesses when the General Assembly returns for its normal legislative term in January.
“We’re going to have more conversations,” Fenberg said, “but those will start Jan. 13.”