Paying taxes is a fundamental requirement for any business. The Omaha City Council is right to seek greater leverage for establishments that haven’t squared up in regard to the restaurant tax. At the same time, the city would do well to include a sensible flexibility as it deals with individual cases.
Practical negotiation to ensure full payment should be the first and major step, for example. Refusing to renew a business’s liquor license for failure to pay, as proposed in the City Council, should be used only in extreme circumstances.
Eating and drinking establishments absolutely have a responsibility to meet their obligation to ensure that tax revenues are properly transmitted to the city. City Council member Rich Pahls is correct when he says, “If somebody runs a business and doesn’t pay it, it’s not fair to the ones following the law.”
Still, refusing to renew a business’s liquor license is a powerful hammer, given the importance of alcohol sales to many establishments’ revenue stream. If the city regularly resorts to too blunt an approach, it could needlessly shove businesses into precarious financial circumstances.
Complications sometimes can arise in calculating the tax. One Benson restaurant owner, for example, described to The World-Herald how his business made an innocent mistake, incorrectly calculating the restaurant tax on deliveries made by delivery services. As a result, his business owes the city about $2,000.
Restaurants account for a significant business sector in the Omaha area. Douglas County as a whole is home to nearly 1,300 eating and drinking establishments. The county has 2.36 establishments per 1,000 residents, putting it 20th among Nebraska counties.
The restaurant sector is projected to make a significant contribution to Nebraska employment in coming years, with 10.2% job growth estimated statewide for 2016-26, according to the Nebraska Department of Labor. That is a gain of about 5,000 jobs.
As of the end of June, 107 restaurants owed a total of about $350,000 in unpaid restaurant taxes, according to the City Finance Department. City leaders’ frustration at the situation is understandable. So is their desire for greater leverage.
The best approach, though, is a pragmatic one: Work with businesses to facilitate timely, full payment. Resort to alcohol license removal sparingly and only as a last resort.
That measured strategy can best serve the city without putting too great a burden on a business sector that offers significant employment growth for the future.