Dewey Beach Town Council says it wants more input from the business community before moving forward with a gross receipts tax.
Dewey Beach Budget and Finance Committee is pushing for a referendum that would let voters decide whether to tax businesses that make more than $200,000 in revenue annually. The committee first introduced the proposal in January.
At a July 12 town council meeting, Commissioner and budget and finance Chairman Courtney Riordan said a tax on business profits is the fairest way to address the town’s structural deficit. Riordan said past attempts to establish a property tax have failed, and the town relies too heavily on transfer taxes, which are not a dependable source of income.
“We have been living hand-to-mouth in Dewey Beach,” Riordan said. “I think we deserve more than that.”
In-town commercial businesses contribute less than any other group to the town’s operating revenue, Riordan said. If the tax were established, 19 businesses would be eligible, and the committee estimates a revenue increase of about $160,000 per year, he said.
Gas, tobacco and alcohol would be exempt from taxation, Riordan said. Motels would also be exempt under the proposal because they already pay an accommodations tax, he said.
Budget committee member Dave Jasinski said businesses would fight the proposal. “This is an issue that will cost the businesses some money,” he said. “But that doesn’t mean we shouldn’t do it.”
Ben Roy, owner of Scully’s, said he wanted the committee to provide information that proves homeowners contribute more to town operations than businesses. “I’d really like to know what the numbers are based on,” he said.
Former Commissioner Jim Laird also questioned the committee’s numbers. “It seems like politics is driving this more than policy at this point,” he said.
Real estate broker T.J. Redefer noted the referendum would be decided by property owners who would not have to pay the tax. “It doesn’t seem fair,” he said.
Property owner Elissa Feldman argued businesses are responsible for much of the town’s expenses, including the police force. “I do think equity could be improved,” she said.
Committee member Joan Claybrook said the town has few options for increasing revenue. “We’re not going to have a property tax. That’s clear,” she said.
Claybrook said businesses could charge pennies more for a drink and pass the cost of the tax onto patrons, much like property owners who pass the accommodations tax onto renters.
Stephen Spence, attorney for Highway One Partnership, which owns Bottle and Cork, Northbeach, Rusty Rudder and Jimmy’s Grill, said a gross receipts tax would be unlawful, and if passed, the partnership would challenge it legally.
In March, Highway One filed a lawsuit against the town related to its business license fees. The partnership says the fees are really an illegal tax because they are used to operate the town. The town argues it has the power to impose a tax.
Dale Cook said the town needs a stable source of income, but when the town gets money, it does not spend it wisely.
Town Manager Marc Appelbaum agreed the town is quick to spend money when it’s available. He said until the town learns to operate efficiently, it should not ask businesses or property owners to pay more.
Mayor Diane Hanson said she wanted to meet with members of the business community before moving the referendum forward. “I think that the businesses do need to pay more,” she said. “But I think we need to start talking.”
Cook said the referendum vote should occur after the election in September. “This is an easy election-issue win,” he said.
Riordan said the committee could ask for a November referendum. “It gives us plenty of time to work on things,” he said.
Town council is scheduled to hold a public hearing on the gross receipts tax proposal at 6 p.m., Friday, July 19, at the Life Saving Station on Dagsworthy Avenue.