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Colorado bars and eateries that have been ordered to limit their capacity are getting a temporary tax break from the state at a time of profound challenge and uncertainty for the industry.
Gov. Jared Polis announced Wednesday that via executive order he has suspended collection of the 2.9% sales tax that businesses must typically return to the government. That means businesses affected by the executive order — bars, restaurants and food trucks — can hang onto an extra $2.90 per $100 in revenue.
“Colorado’s restaurants, bars, and food trucks are among the small businesses that have been hit the hardest by the pandemic,” Polis said in a statement. “We all want to keep these businesses open as a vital part of our lives and culture, which is why I’m proud to be working with a group of bipartisan legislators to provide much needed tax relief.”
The governor has the authority to suspend collection of the taxes, but only temporarily. The legislature has the authority to actually forgive the obligation to return these revenues to the state — and it plans to do just that when it convenes next week for a special session on COVID-19 relief. Among a slew of stimulus policies the General Assembly is expected to adopt is a forgiveness of sales tax obligations up to $2,000 per month for affected businesses through at least February.
“The intent of the executive order is to give advance notice to bars and restaurants now about extending the November collections deadline, ahead of the special legislative session,” the governor’s office stated in a press release.
Lawmakers and Polis remain deeply frustrated by the lack of recent congressional action to pass a new federal stimulus. The state cannot afford to float all struggling businesses.
“Nor should the state,” said state Sen. Jack Tate, R-Centennial, who plans to be a sponsor of the bill next week to forgive this tax into next year. “You can’t have the state underwrite the entire business community, but you can protect it from unfair and adverse actions.”
Added state Sen. Jeff Bridges, D-Greenwood Village, who also plans to sponsor the bill, “This isn’t going to relieve all the burdens, but it’s on us to do as much as we can to help those small businesses that have been hardest hit by the pandemic.”
Indeed, the hits keep coming for many businesses — particularly those in counties at Level Red on the state COVID-19 dial. Bars and restaurants, which generally operate on tight margins, have been among the businesses most impacted by the pandemic.
But the suspension of the tax won’t be a cure-all, by any stretch; in-person dining is shut down across large swaths of Colorado, including in the entire Denver metro, and a recent survey by the Colorado Restaurant Association found that roughly 4 in 5 restaurants here say they would have to consider shutting down within six months as long as in-person dining is suspended.
Bridges said that the forthcoming bill includes the $2,000 monthly cap in part because the legislature does not want to offer major relief to big corporations that don’t need it as badly as small companies do.
“The goal is to help small business owners who are most impacted by COVID, and who need the most help right now to make it through the winter and keeps folks employed,” he said. “So we’re targeting these funds in a way to make sure that those who need the most help get the most out of it.”