N.H. Mulls Taxing Restaurants on Tips

Concord — The Senate will decide next week whether to try to block the state from taxing restaurants and other businesses for the tips collected by employees.

The Department of Revenue Administration says cash tips totaling more than $20 a month have been part of the statutory definition of employee compensation under the Business Enterprise Tax since it was created in 1993. But from 1994 to 2008, the related administrative rule indicated tips didn’t count as compensation, which is taxed by the BET.

Republicans and restaurant owners complained last week that the DRA’s push this year to uniformly enforce the tips rule amounts to a new tax.

The Senate Ways and Means Committee voted yesterday, 5-0, to modify the BET law to state the tax on compensation applies to money “paid directly or accrued by the business enterprise,” and specifically exempt “any tips required to be reported by the employee to the employer” under federal tax law.

“Creating new taxes on employers based on dollars their businesses do not count as income is the wrong approach to take towards the state’s hospitality industry, particularly as we near the summer tourism season,” said Sen. Bob Odell, R-Lempster, the committee’s chairman. “Today’s vote establishes a clear statutory guideline against this sort of taxation and I look forward to a strong, bipartisan vote in support of the bill on the floor next week.”

The BET tweak was attached as an amendment to an unrelated bill that would establish a committee to study Keno. If the Senate approves the bill with the BET amendment, the legislation will go back to the House.