Lifetime Citizen Portal Access — AI Briefings, Alerts & Unlimited Follows
Madison council opens public hearing on 1% food and beverage tax, estimates about $700,000 a year
Loading...
Summary
City officials presented details of a proposed 1% local food and beverage tax at a public hearing Aug. 5, saying state law limits how revenue may be used and estimating roughly $700,000 in annual receipts, about one-third of which would come from visitors.
Madison city leaders opened a public hearing Aug. 5 on an ordinance to adopt a 1% food and beverage tax that would be collected on prepared food and beverages sold on city property and remitted through the Indiana Department of Revenue. Mayor Courtney and staff said the city would receive the collections and that state law limits the uses of the revenue to parks, economic development and tourism-related expenditures.
The tax, if adopted, would appear as a separate line item at point of sale, city staff said during the hearing. “The food and beverage tax is a 1% sales tax that's added to your food and drink purchases in certain places,” Mayor Courtney said during an overview to council before the hearing. Staff estimated the tax would generate about $700,000 a year; the city said roughly one-third of food-and-beverage spending in Madison is by visitors.
Why it matters: City officials framed the tax as a designated revenue source for capital projects tied to tourism and place-making at a moment when state legislative changes are projected to reduce local property-tax revenue. The mayor and outside advisors urged council members to consider the tax as a way to preserve investment in parks, the downtown and visitor-facing infrastructure while other state funding and tax structures change.
City staff outlined how the tax would be applied. It would cover sales where food or beverages are prepared or served on premises — restaurants, bars, cafes, catered events, food trucks and prepared or heated grocery items — and would be collected by vendors as part of their sales-tax remittance to the Department of Revenue. Items that are exempt from retail sales tax would also be exempt from the food-and-beverage tax, staff said. Staff said the intention is for the food-and-beverage portion to be separately identifiable on receipts.
Public comment at the hearing focused on two practical points: whether receipts will show a separate line for the new tax and whether grocery purchases will be affected. Karen Skillman asked whether the 1% would appear as a separate line on receipts; a staff member said the city will work with businesses and point-of-sale vendors so the charge is separate and identifiable. Staff also clarified that grocery items are subject to the tax only if they are prepared or served on premises; ordinary off-the-shelf grocery purchases are not subject to the proposed tax.
Council process and next steps: The council introduced ordinance 2025-13 (adopting the 1% food and beverage tax and establishing a food-and-beverage tax receipt fund) during the meeting; councilmembers scheduled the measure for second reading at the next meeting. If adopted later, revenues would be deposited in a designated fund and appropriated by council through the regular budget process.
Context and constraints: Council members and several public commenters emphasized that state law dictates both the timing of local adoption and the permitted uses of the revenue. The mayor and outside legal/finance advisors said the revenue must be used for the three categories spelled out by statute and cannot be diverted to general operations. Several councilmembers and members of the public asked staff to present more-detailed plans in future budget discussions showing specific projects or subaccounts within the statutory categories.
Ending note: No vote on final adoption occurred at the Aug. 5 meeting; the ordinance advanced to second reading. Council members said they'll use the upcoming budget cycle to recommend specific appropriations if the tax is adopted.
