Committee advances bill to split 1% meals surcharge between towns and tourism, adds trade commission

The Finance, Revenue and Bonding Committee voted to advance SB 2 to further committee consideration, moving a package of sales-tax and tourism measures to the next stage of the session.

Senator Fonfair, the bill proponent, said the measure would create a new sales-and-use exemption related to energy consumption for businesses, require restaurants and retailers to report meals-tax revenue by individual location, and “redirect the proceeds of the 1% surcharge on meals sold” so 50% would go to towns and 50% to tourism. The bill also creates a municipal diversification account to disburse funds to municipalities and establishes a new Connecticut–India Trade Commission to promote trade with India.

Why it matters: The bill would change how the state’s prepared-meals surcharge is used and is estimated in committee testimony to reduce general-fund receipts by about $120 million a year — roughly $60 million intended for municipalities and $60 million for tourism. Supporters said the change would fund under-resourced tourism promotion and deliver direct local relief; critics warned the redirect could undermine long-term budget discipline unless distribution rules are clear.

Representative Pilata asked whether the 50/50 split was correct and whether there was a dollar estimate; the proponent confirmed the split and testified to the roughly $120 million estimate. Representative Claire DeSutra pressed staff on whether municipalities have previously received any of the 1%; staff and the chair answered that municipalities had not received these proceeds since the tax’s 2019 enactment and that the bill would clarify the intent to return some proceeds to towns.

Several lawmakers expressed support for the tourism allocation and for returning revenue to towns but urged clarity on the mechanism that would determine which municipalities receive funds. Senator Perilla and Senator Wong both said they want the distribution framework to ensure municipalities that generate more prepared-meals revenue do not lose out unfairly; nonpartisan staff confirmed the bill does not yet set a final allocation formula.

Outcome and next steps: The committee clerk called the roll; the motion to send SB 2 JFS to the floor passed in the committee vote. Lawmakers held the written roll call open until 5 p.m. for final entries. The committee’s action advances SB 2 for further floor-level consideration and negotiation, with details about municipal distribution and implementation still to be resolved.