New Maryland Alcohol Tax Causes Headaches for Restaurants

The widely publicized 3% increase in the sales tax on alcoholic beverages took effect July 1, but restaurants and bar owners are already finding new problems with the law that went unnoticed by legislators.

The biggest challenge facing restaurant owners involves calculating the service charges and automatic gratuities applied to large parties. The new law stipulates that when restaurants calculate the sales tax on the service charge, they must apply the 9% alcohol sales tax rate to any alcohol or alcohol-related service charges.

The remaining service charges are taxed at the regular six percent sales tax rate. This provision makes calculating total sales tax much more difficult and time consuming for servers. ABI strongly opposed raising the state's alcohol tax and ran ads warning lawmakers of the possible implications.

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