House approves bill on restaurant tax


The House of Delegates intervened yesterday in a legal battle between Comptroller William Donald Schaefer and the restaurant industry.

The result of House action may be an increase in food and drink prices at restaurants that treat patrons to free, live background music.

Despite opposition from Republican lawmakers, the House voted 82 to 53 to subject restaurants that hire performers to Maryland's admission and amusement tax. The bill now goes to the Senate.

"The question is, if you and your spouse go to a local restaurant, and the owner of the restaurant pays some high school student to play the piano, should your drinks and food be taxed?" asked House Minority Leader Alfred W. Redmer Jr., a Baltimore County Republican.

The tax, which is assessed by local governments and collected by the comptroller, is charged on tickets for a variety of cultural and recreational activities, such as movies, plays, amusement parks and concerts. Counties can set the rate as high as 10 percent of ticket prices.

But a dispute has arisen over whether the tax applies to restaurants trying to enhance patrons' dining experiences by hiring live entertainers.

Without clear legal guidance, Schaefer has been trying to collect the tax, which gets sent to local governments. The comptroller's office has collected $8.5 million from restaurants using live performers during the past three years.

"This is in the best interest of counties," said Michael Golden, a Schaefer spokesman.

But the owner of Clyde's of Chevy Chase and Clyde's of Columbia filed a lawsuit in 1999 when the comptroller sought $55,000 from the two restaurants. The restaurants' owner argued the tax did not apply because the sites do not charge admission.

The Baltimore Circuit Court sided with the owner, and the Court of Special Appeals rejected an appeal by the comptroller in January.

Supporters of the bill argued yesterday that local governments could be forced to return collected taxes unless the Assembly clarifies the law. It could also cost counties $3.6 million altogether in annual revenue each year. "This will keep the comptroller from having to decide whether or not certain entertainment is considered background or performance," said Del. Sheila E. Hixson, chairwoman of the Ways and Means Committee.

Thomas B. Stone Jr., an attorney for the Restaurant Association of Maryland, countered the bill is merely a new tax. "For the average person, it is going to cost you more money and, obviously, it will cost restaurants more money," Stone said.

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