After swelling outcry from the hospitality industry, the state said Thursday that it would make a decision on changes for the collection of sales taxes from businesses later today in light of the ongoing novel coronavirus crisis.
In a press conference on Thursday morning, Robert Mujica, the state’s budget director, said the tax department is “looking at the deadline,” but noted that restaurants and bars are holding sales tax on revenues that they accrued before the crisis started.
“The businesses collect them on behalf of the state, so they’re holding the taxes,” he said. Mujica then added that they are “considering” making a change.
The deadline to pay sales tax — which typically represents 5 to 10 percent of revenue and is collected once every quarter for businesses — is March 20, and the state’s announcement comes amid growing calls by several restaurant and bar owners and street food vendors to forgive tax collection until restaurants can return to normal business.
On Tuesday, Mayor Bill de Blasio said that businesses would need to pay taxes on time because New York City “does not have unlimited resources” and said owners will need to “provide proof of hardship” for allowances.
“We just don’t have the money to pay taxes right now,” says Mamdouh Elgammal, a food vendor who used to work by LaGuardia Community College. He is one of hundreds of NYC street food vendors who have stopped working this week as foot traffic in the city has plummeted with extraordinary restrictions on public life that are in place due to COVID-19. “We have to pay rent and look after our kids at home,” he adds.
Suspension of the sales tax is “essential,” says Yong Zhao, the CEO of Chinese-American fast-casual chain Junzi. The company is currently trying to pivot its menu and operations to meet new demand — at-home customers looking for different dining options than a single meal for one night — and keep staff employed. It’s difficult to do so, Zhao says, when financial resources are constantly being drained.
Advocacy group Move On has launched a petition calling on Governor Andrew Cuomo to not just forgive tax collection until business normalizes but to also return the sales tax amounts that businesses have already submitted so far.
Sam Goetz, the owner of Judy’s, a popular cafe and bar in Sunset Park, Brooklyn, notes that the quarterly sales tax payment is very high, almost as much as the monthly cost of goods at Judy’s, and deferment could be necessary for survival. “We’re all about to be very cash strapped with lots of bills to pay — rent, inventory, insurance, utilities — and being able to defer a mega-bill like quarterly sales tax until we are allowed to get back up and running would be extremely helpful in avoiding default,” Goetz tells Eater.
Even for restaurants that meet the state’s requirements to pay the tax on a monthly basis, rather than quarterly, it’s a hit. At Bowery bar Short Stories, owner Matt Arnold says that while revenues are down “basically close to 100 percent,” the business still has to pay many of its vendors on a 30-day period, as well as funneling as much money as possible towards employee retention. The tax money could go to fund any one of those numerous business needs right now, Arnold says.
It’s a sentiment echoed by Andrew Rigie, the executive director of the NYC Hospitality Alliance, a nonprofit that represents hundreds of restaurants and bars citywide.
“Restaurant and bar owners are in crisis mode and fighting for survival,” Rigie tells Eater. “If government doesn’t totally forgive sales tax payments for them to use to cover expenses, then business owners need to be extremely careful because failure to remit sales tax has significant consequences.”
Calls to waive the sales tax are the latest push for relief by an industry that is reeling from the closures of restaurants and bars and the loss of thousands of jobs. Aside from sales tax, restaurants are also asking for a cap on food delivery service fees and street food vendors are asking that outstanding tickets be waived until businesses go back to normal.
Eater will update this story with more details when they’re available.