BILL SUMMARY for SB09-121
SENATE COMMITTEE ON FINANCE
|Votes: View--> ||Action Taken: |
|Add a Safety Clause to Senate Bill 09-121. The mo|
Refer Senate Bill 09-121, as amended, to the Commi
|Pass Without Objection|
The meeting was called to order. A quorum was present.
10:33 AM -- Senate Bill 09-121
Senator White, prime sponsor, presented Senate Bill 09-121, a bill related to the tax treatment of employee meals by restaurants. The bill eliminates the requirement that free or reduced-priced meals provided to employees of restaurants be considered as part of their wages in order for the meals to be exempt from sales and use taxes. Senator White stated that the Colorado Department of Revenue (DOR) has determined that restaurants have to show that employee meals are part of their wages. If the meals are not included as part of a wage, he stated, then the restaurant owes a back tax. The bill, he said, brings the tax law and current practice into conformance.
The following witnesses testified:
10:38 AM -- Mr. Philip Horwitz, representing DOR, testified about the bill. He stated the department has no position on the bill or whether there should be a tax exemption for restaurants from sales taxes. Mr. Horwitz stated that the $400,000 fiscal impact does not include any audit or additional amount of money, but only what is self reported by the restaurants. Mr. Horwitz responded to questions from the committee about the self reporting requirements of the employer, how the department determines whether it is included in the W2, and the tax treatment of employee wages, and the tax liability of the restaurant employer. He further explained to the committee the tax impact if the meal is included as part of employee wage. Finally, Mr. Horwitz addressed questions about Colorado's income tax forms.
10:54 AM -- Mr. Robert Williams, representing The Bailey Company, testified about the bill and provided the committee with background about of his current tax dispute with the DOR. Mr. Williams responded to questions from the committee about employee meals and the tax liability his company is facing.
10:59 AM -- Mr. Mark Stanley, representing the Phantom Partners Corporation, testified about the bill. Mr. Stanley stated that tracking this tax burden on employee meals is onerous for businesses. He said that because of the current interpretation by DOR, the benefit to employees is disappearing in restaurants. Mr. Stanley responded to questions from the committee about the meals and how many restaurants are being impacted.
11:07 AM -- Ms. Christine O'Donnell, representing the Colorado Hotel and Lodging Association, testified in support of the bill. Ms. O'Donnell said she supports the bill because it clarifies the law on sales taxes. Ms. O'Donnell stated that one of the restaurants in the association is involved in a dispute with DOR auditors and the company faces a $48,000 tax liability. She responded to questions about the dispute, the clarity of the tax law, and the effective date of any proposed legislation.
11:12 AM -- Mr. Pete Meersman, representing the Colorado Restaurants Association,. testified in support of the bill. He distributed a handout about the Fair Labor Standards Act (FLSA) (Attachment A) and the Employer's Tax Guide to Fringe Benefits, published by the IRS (Attachment B). Mr. Meersman stated that because of the FLSA, employee meals are part of lodging, and fringe benefits are not subject to a sales tax. He stated the association tells restaurant employers that employee meals are exempt. Mr. Meersman expressed disagreement with the fiscal note, and responded to questions from the committee about how many restaurants are paying the sales taxes at present.
11:20 AM -- Mr. Jason Schrock, Legislative Council Staff (LCS), responded to questions from the committee about the fiscal note. He stated that the estimate came from a sample of restaurants that are claiming sales taxes revenue on the Colorado tax forms. He also stated that there is no way for the DOR to determine the amount of sales tax revenue that restaurants are currently not paying. Discussion ensued about the fiscal note.
11:30 AM -- Mr. Mark Stanley returned to the table and answered questions about the Colorado tax form and tax filing for restaurants.
Senator Sandoval closed public testimony. She disclosed that she is a restaurant owner but will be voting on SB 09-121 because the bill does not benefit her personally. Discussion ensued about whether the bill should be sent to the Committee on Appropriations or the Committee of the Whole.
|TIME: || 11:32:41 AM|
|MOTION:||Refer Senate Bill 09-121, as amended, to the Committee of the Whole. The motion passed 7-0. |
Final YES: 7 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS
The committee recessed.