City of Omaha waiving restaurant tax penalties

Restaurants in the City of Omaha have received some good news. On September 3, Mayor Jean Stothert announced that the city’s Finance Department has been directed to forgive late fees on restaurant tax payments due from March through the end of 2020.

Nebraska’s first positive COVID-19 case hit the Omaha metro on March 6. As part of an effort to “flatten the curve” and slow the spread of the virus, restaurants in Omaha were ordered to close as of March 19 under a Directed Health Measure issued by the Nebraska Department of Health and Human Services.

A July 10 Platte Institute policy brief explored the impact of the CARES Act Paycheck Protection Program (PPP) on Nebraska. It was noted that when looking at industry breakdown, more than 36,000 accommodation and food service jobs were retained by PPP loans or 11% of the total jobs retained. This industry was the second leading industry that benefited, demonstrating that this sector was one of the hardest hit by the pandemic.

Restaurant tax penalties and interest from March through August 31, 2020, have totaled approximately $80,000. Owners who have not yet paid will not be charged these fees, and those who have already paid will receive a credit for the amount paid.

According to the city, 2,300 restaurants are required to pay the restaurant tax, which is a 2.5% occupation tax on the gross receipts from sales of prepared food and beverages. While many restaurants have reopened, they are not yet operating at full capacity. This is due to both restrictions needed because of social distancing, as well as the reality that some customers are not yet comfortable with the notion of dining out.

Pushing the tax due date to the end of the year will benefit struggling restaurants by giving them a little more cash flow. This is important because restaurants typically do not have very high profit margins. The typical restaurant generates a profit margin of only 4-6%, but some only generate 1.5%

According to the National Restaurant Association, the restaurant industry is a significant economic driver. For every $1 spent at Nebraska area restaurants, $1.59 to $1.79 is contributed to the state’s economy. In 2019, 96,900 Nebraska workers were employed by the restaurant and foodservice industry, accounting for 9% of jobs.

We at the Platte Institute applaud this decision by Omaha’s mayor. This is a commonsense approach to provide some much needed economic relief to local area businesses.