Meals and Rooms Tax
New Hampshire's meals and rooms tax is a 8.5% tax on room rentals and prepared meals. That includes some prepared, ready-to-eat foods at grocery stores like sandwiches and party platters. The tax applies to any room rentals for less than 185 consecutive days and to function rooms in any facility that also offers sleeping accommodations. There is also a 8.5% tax on car rentals. There are some exceptions for schools, charities, and nonprofits.
Starting on October 1, 2021, the meals and rooms tax rate was decreased from 9% to 8.5%.
The tax is collected by hotels, restaurants, caterers, and other businesses. They send the money to the state. A bit of that money goes toward school building loans and tourism promotion. State law requires 40% to go back to towns based on their population, but for many years the state shortchanged that revenue sharing. The rest goes to the state's general fund.
Cuts to the town share of revenue
By law cities, towns, and unincorporated places in New Hampshire are supposed to get 40% of the meals and rooms tax revenue, but that became less certain after the 2009 recession. Changes were made to the meals and rooms tax allocation formula that saw a smaller percentage going to towns and more money staying in the state's general fund. The 2022-2023 budget set revenue sharing at 30% going forward, which increases the share of funds returning to municipalities by $50 million in 2022. However, overall meals and rooms tax revenue is down due to the COVID-19 pandemic, and with the October 2021 tax cut, the long-term outlook for local revenue sharing is uncertain.
Local meals and rooms taxes
Several times in recent years, the Legislature has debated a bill that would have allowed cities and towns the option to add a local tax on meals and rooms. So far, all those bills have failed.
Changing how revenue is distributed
There have been other efforts to change how the portion of meals and rooms tax revenue going to towns is shared out. Several times in recent years, the Legislature has looked at bills that would see some or all of meals and rooms tax revenue distributed based not on a town's population, but on how much of that revenue was generated in the town.
For example, in the 2013 legislative session, then state Sen. Nancy Stiles (R-Hampton) filed a bill, SB 121, which would have seen 56% of the town share of meals and rooms tax revenue still distributed based on population, but 44% distributed back to the towns that had raised it, based proportionally on how much revenue they generated. The bill failed.
Tourist towns argue they deserve a bigger cut because they carry a larger burden on their infrastructure from tourism. However, a redistribution could significantly hurt the budgets of communities that lack tourism. Western New Hampshire, for example, generates far less meals and rooms tax revenue than the Seacoast and the North Country, both popular tourist destinations.