Proposed bill could allow cities to tax up to one percent on food and drinks

INDIANAPOLIS, Ind. (WANE) - A proposed bill could allow Indiana cities to tax up to one percent on food and drinks.

Indiana House Bill 1071 is currently in the Indiana House Ways and Means Committee.

The bill, if approved, would allow Indiana municipalities the option to tax a maximum of one percent on food and beverages. The tax can only be .25%, .50%, .75% or 1%.

Municipalities that already tax food and beverage would not be allowed an additional percentage based on this current proposal.

Cities can use the money for only the following:

• Reduction of municipal property tax levies in an ensuing budget year
• Property tax relief
• Replacement of revenue lost as a result of homestead credits paid under IC 6-1.1-20.6
• Payment of debt service and lease rentals
• Payment of costs of a capital project
• Operating revenue

There are 12 cities in Indiana that already do this, some of which include Carmel, Avon, and Zionsville. These taxes generated around $6.7 million in revenue during 2011 and $7.3 million in 2012 for these cities.

Shipshewana, a town about 55 miles from Fort Wayne, also imposes this tax. In 2012, the town generated $100,680 and in 2011, they made $99,204 from the tax. Shipshewana, a town of around 600 people, is known for its tourism because of the large flea market and Amish restaurants in that area.

The summary of  House Bill 1071 reads as follows:

Municipal food and beverage tax. Authorizes a municipal legislative body to impose by ordinance a municipal food and beverage tax. Provides that the tax may not exceed 1% of the gross retail income received from retail food and beverage transactions. Provides that the tax does not apply to a transaction that is exempt from the sales tax. Provides that the tax does not apply to a consolidated city, a municipality that has imposed a food and beverage tax under current law, or a municipality entitled to receive county food and beverage tax revenue.

The bill has bipartisan support, with two Democrats and two Republicans backing it. The bill was first introduced in 2012 with no action.

It's not clear when the House Ways and Means Committee will vote on this proposed bill, if at all. 

An earlier version of this story stated Indiana State Senator Jim Banks (R-Columbia City) tweeted a link to the bill. Actually, Sen. Banks re-tweeted someone's opposition to the bill. The link in the tweet was to a third party website allowing individuals to contact representatives regarding HB 1071. We apologize for any confusion the earlier version may have caused.