Could Montgomery County See an Additional 3% Food and Beverage Tax?

Maryland is examining whether counties and municipalities should be allowed to impose additional taxes on restaurant meals and beverages. A new state presentation outlines the potential revenue, while restaurant, tourism, and hospitality organizations have raised objections to the proposal.

Maryland is taking another look at whether local governments should be permitted to impose an additional tax on restaurant meals and beverages, potentially adding as much as 3% to purchases already subject to the state’s 6% sales tax.

On October 2, 2026, the Maryland Department of Legislative Services presented a 14-page analysis of food and beverage taxes to the state’s newly established Task Force to Modernize County and Municipal Revenue Structures. The presentation examined how other jurisdictions use these taxes, the revenue Maryland local governments might collect, and the potential consequences for businesses and consumers.

The proposal has also surfaced as a possible revenue source in local discussions, including the October 8 Takoma Park mayoral debate. It is part of a broader effort by the Maryland Municipal League (MML) to provide municipalities with additional revenue options and reduce their dependence on property taxes.

But the proposal has encountered considerable resistance. Legislation authorizing a local food and beverage tax failed during the 2025 General Assembly session, following organized opposition from restaurants, hotels, tourism organizations, beverage producers, and business associations.

Now, with a statewide task force examining the issue and recommendations due in December, food and beverage taxation remains part of Maryland’s discussion about how local governments should finance public services.

Read the October 2, 2026 Department of Legislative Services presentation

A new state task force is examining local taxing authority

The task force was established through House Bill 1142, sponsored by Delegate Jheanelle Wilkins, whose Maryland Legislative District 20 includes Takoma Park and parts of Silver Spring. Governor Wes Moore signed the legislation into law on April 14, 2026, creating a formal review of how Maryland counties and municipalities raise revenue and whether additional taxing authority should be considered.

Chaired by Maryland Comptroller Brooke Lierman, the task force is examining property taxes, local sales and use taxes, hotel taxes, food and beverage taxes, and other potential revenue sources. The Department of Legislative Services provides research and analysis for those discussions, including the October 2 presentation on food and beverage taxation.

The task force must submit its findings and recommendations to the governor and General Assembly committees by December 1, 2026. The October presentation is one of several briefing documents prepared to inform its work and does not constitute an endorsement or authorization of a new tax.

Any new authority for Montgomery County or its municipalities would require subsequent legislation.

Read HB 1142 and its legislative history

View the task force’s official website, meeting videos, and supporting documents

What exactly is the proposed food and beverage tax?

During the 2025 General Assembly session, lawmakers introduced House Bill 997 and Senate Bill 324, companion measures formally titled Admissions and Amusement Tax – Food and Beverages.

The legislation would have allowed Maryland counties and municipalities to impose an additional tax of up to 3% on qualifying food and beverage sales.

Although generally described as a meals tax, the proposal used Maryland’s existing admissions and amusement tax framework. It would have expanded that authority to include food and beverages sold by establishments with facilities for on-premises consumption, including qualifying carryout and delivery purchases.

The original legislation included restaurant meals, coffee, soft drinks, prepared foods, and alcoholic beverages consumed on the premises. It exempted off-premises alcohol sales, certain grocery purchases, and vending-machine transactions.

Maryland currently imposes a statewide 6% sales tax on most restaurant meals. If Montgomery County received the authority and adopted the maximum additional 3%, the effect would look like this:

Restaurant purchase	Current	With additional 3%
Restaurant meal	$100	$100
Maryland sales tax	$6	$6
Additional local tax	$0	$3
Total	$106	$109

The total tax on a restaurant meal would increase from 6% to 9%, a 50% increase in the amount of tax charged.

The proposed legislation would not have required local governments to impose the tax or adopt the maximum rate. Those decisions would have been left to individual jurisdictions.

Read the original text of HB 997

Why does the Maryland Municipal League want the tax?

The Maryland Municipal League made expanded local food and beverage taxing authority one of its legislative priorities in 2025.

House Bill 997 was sponsored by Delegate Ryan Spiegel, a former MML president, who presented the legislation to the House Ways and Means Committee in February 2025.

In a February 26 article explaining its support, MML argued that Maryland municipalities have limited ways to raise revenue and depend too heavily on property taxes to finance public services.

The organization pointed to Maryland’s tourism industry, estimating that more than 43.5 million people visit the state annually. Those visitors use local roads, public safety services, parks, and other infrastructure but do not necessarily contribute directly through municipal property taxes.

MML also argued that local sales and meals taxes are common elsewhere in the country. According to the organization, 45 states and the District of Columbia either share sales-tax revenue with local governments, authorize local sales taxes, or permit local food and beverage taxes.

Its proposal was to give local governments the authority to decide whether additional taxation made sense for their communities, rather than requiring every jurisdiction to impose a tax.

MML submitted written testimony supporting SB 324 in January 2025, identifying the measure as a joint legislative priority with the Maryland Association of Counties and Baltimore City.

The question for Montgomery County is whether revenue from food and beverage purchases could meaningfully reduce reliance on existing taxes or would simply provide another source of funding for general government expenses.

Read MML’s February 26, 2025 explanation of the proposed tax

Read MML’s original written testimony supporting SB 324

Maryland’s hospitality industry actively opposed the proposal

While local government organizations supported the 2025 legislation, multiple trade associations submitted formal written testimony opposing it. Their objections extended beyond restaurant operators to tourism organizations, hotels, alcoholic beverage producers, and chambers of commerce.

These organizations submitted their statements directly to Maryland legislative committees, and their original letters remain available through the General Assembly’s public records.

Restaurant Association of Maryland

The Restaurant Association of Maryland submitted written opposition to HB 997 on February 24, 2025, signed by Melvin R. Thompson, senior vice president for government affairs and public policy.

The association argued that restaurants typically operate with profit margins averaging approximately 3% to 5% and were already facing inflation, higher labor costs, and debt accumulated during the pandemic.

It warned that operators would be unable to absorb the additional tax and would instead pass the cost to customers through higher menu prices. The association argued that those increases could discourage dining out, reduce sales, and potentially result in fewer employee hours and jobs.

The distinction is important. Even if customers pay the tax directly, restaurants could still bear an economic cost if higher prices change spending patterns. Customers might order less, dine out less frequently, or choose establishments in jurisdictions without the additional charge.

Read the Restaurant Association of Maryland’s February 24, 2025 opposition testimony (PDF)

Maryland Tourism Coalition

The Maryland Tourism Coalition submitted a January 27, 2025 letter opposing SB 324, the Senate companion to HB 997.

The coalition argued that although tourists contribute substantial restaurant spending, many restaurant customers are Maryland residents who would pay the additional tax on everyday meals.

It also raised a separate concern about government revenue. The legislation did not prevent jurisdictions from imposing the new tax while continuing to increase property taxes, nor did it require the proceeds to be dedicated to a specific public purpose.

The coalition argued that if hospitality-related spending were taxed further, part of the revenue should support tourism marketing and programs intended to sustain the industry.

Its objection highlights a distinction between allowing local governments to collect additional revenue and requiring them to use that money to reduce existing tax burdens.

Read the Maryland Tourism Coalition’s January 27, 2025 opposition testimony (PDF)

Maryland Hotel Lodging Association

The Maryland Hotel Lodging Association submitted written opposition on January 29, 2025, signed by President and CEO Amy Rohrer.

The association noted that the proposed tax could apply to hotel banquets, conventions, meetings, room service, and restaurants or bars operating within hotels.

Its testimony argued that hotel guests already pay state sales taxes and local occupancy taxes, and that additional charges could increase the cost of conferences, tourism, and other hospitality-related activities.

The association warned that these costs could discourage travel-related business, potentially affecting employment and government revenue. The concern extends beyond restaurants to hotels that rely on conferences, banquets, and other food-service activities.

Read the Maryland Hotel Lodging Association’s January 29, 2025 opposition testimony (PDF)

Distilled Spirits Council of the United States

The Distilled Spirits Council submitted opposition to SB 324 on January 27, 2025, arguing that alcoholic beverages in Maryland were already subject to a 9% state sales tax, along with excise taxes and licensing fees.

The organization warned that an additional local tax on drinks sold in restaurants and bars could increase consumer prices and reduce sales.

Its testimony included projections of approximately $50 million in lost sales and more than 600 jobs lost statewide. Those figures were estimates advanced by the industry organization in opposition to the bill, rather than independently established outcomes.

The council also questioned imposing another tax on an industry that already generates substantial state and local tax revenue through multiple taxes and fees.

Read the Distilled Spirits Council’s January 27, 2025 opposition testimony (PDF)

Howard County Chamber of Commerce

The Howard County Chamber of Commerce submitted written opposition to SB 324 on January 29, 2025.

The chamber argued that the proposed tax would increase costs for consumers and create additional pressures on restaurants and other food-service businesses operating on narrow margins.

It also raised concerns about competition, noting that differences in which businesses were covered by the tax could create uneven conditions among establishments.

The chamber warned that the measure could affect tourism and restaurant activity while introducing additional complexity into the local business environment.

Read the Howard County Chamber of Commerce’s January 29, 2025 opposition testimony (PDF)

Additional industry opposition

The General Assembly’s Senate witness records also identify unfavorable positions from representatives of the Maryland State Licensed Beverage Association and Maryland Distillers Guild, among others.

Those records document registered opposition, including witnesses listed for oral testimony. They should be distinguished from the written statements summarized above, which provide specific explanations of each organization’s position.

Taken together, the filings establish that organized industry opposition was substantial during the 2025 legislative session. They do not demonstrate that every individual restaurant, hotel, or beverage producer opposed the tax, nor do they constitute new testimony specifically addressing the October 2026 task force presentation.

Review the Maryland General Assembly’s complete SB 324 witness and testimony records

What does the new state analysis say about the economic effects?

The October 2 Department of Legislative Services presentation takes a broader look at food and beverage taxes and their effects in other jurisdictions.

The department reports that these taxes generally have not discouraged food-service consumption. It also notes that a substantial portion of restaurant spending in some jurisdictions comes from visitors and commuters.

For example, the presentation estimates that approximately 34% of food and beverage tax revenue in Fairfax County, Virginia, comes from visitors and commuters. The share can exceed 50% in resort communities, although it tends to be lower elsewhere.

Those observations support the argument that local governments can collect revenue from economic activity involving people who do not reside within their boundaries.

However, the analysis does not include a Montgomery County-specific study showing how an additional 3% tax would affect restaurants, customers, or overall spending here.

The Department of Legislative Services also identifies concerns about revenue stability and economic fairness. It notes that dining out can decline during economic downturns or public health emergencies, making food and beverage tax revenue sensitive to changes in consumer spending.

The presentation additionally describes flat-rate sales taxes as generally regressive because lower-income households may pay a larger proportion of their income in taxes than higher-income households.

For example, someone earning $40,000 annually would pay the same additional $3 tax on a $100 restaurant meal as someone earning $200,000. That charge represents a greater share of the lower-income person’s resources.

The state’s findings and the trade associations’ objections therefore offer different perspectives on the potential effects of a local food and beverage tax. Neither establishes precisely what would happen if Montgomery County adopted one.

Read the state’s October 2 presentation, policy considerations, pages 3–4

Ocean City already has a food and beverage tax, but for a specific purpose

Maryland has one notable example of a local food and beverage tax, although its structure is considerably different from the authority proposed in 2025.

Worcester County imposes a 0.5% food and beverage tax within Ocean City, authorized specifically to help finance the Roland E. Powell Convention Center.

Under Maryland Local Government Code § 20-602, the county may collect a food and beverage tax of up to 1% in a designated resort area, with the proceeds dedicated to paying principal and interest on bonds associated with convention-center construction, reconstruction, renovation, repair, or equipment.

Worcester County has established the tax at 0.5%. The October 2026 state presentation estimates that it generates approximately $110,000 annually.

A qualifying $100 restaurant purchase in Ocean City therefore carries an additional 50 cents in local food and beverage tax, compared with the $3 that would result from the maximum rate contemplated in the unsuccessful 2025 legislation.

The distinction is how the revenue may be spent. After authorized collection costs, Ocean City’s food and beverage tax proceeds are dedicated to convention-center financing rather than unrestricted government operations.

Under the county ordinance, the remaining proceeds are transferred to a dedicated fund for the convention center’s bond obligations. The authority to impose the tax is also tied to satisfying those obligations, subject to any later termination date permitted by state law.

The broader taxing authority proposed under HB 997 did not establish comparable requirements to dedicate revenue to a specific public investment.

Ocean City’s arrangement demonstrates a narrower approach in which a tax is authorized for an identifiable purpose, with restrictions on the use of the proceeds and a financial condition governing its duration.

Read Worcester County’s official food and beverage tax explanation

Read Worcester County’s food and beverage tax ordinance

How do Maryland’s restaurant taxes compare with neighboring jurisdictions?

The October 2026 state presentation also compares restaurant meal taxes in Maryland with rates in nearby states and the District of Columbia.

Jurisdiction	Combined restaurant tax
Montgomery County, currently	6%
Montgomery County, if an additional 3% were adopted	9%
Ocean City, Maryland	6.5%
Washington, D.C.	10%
Philadelphia, Pennsylvania	8%
Selected Virginia jurisdictions	Up to 13.5%

Virginia permits local governments to impose meals taxes in addition to applicable state and local sales taxes. The state presentation identifies local meals tax rates generally ranging from 4% to 6.5%, with higher rates in some municipalities.

These comparisons demonstrate that local meals taxes are established revenue sources in neighboring jurisdictions, although their rates, exemptions, and methods of collection differ considerably.

A hypothetical 9% combined restaurant tax in Montgomery County would remain below Washington, D.C.’s 10% meals tax while exceeding the 6% currently charged on most restaurant meals elsewhere in Maryland.

The competitive implications would depend on customer behavior, the locations of affected establishments, and whether neighboring jurisdictions were also authorized to impose similar taxes.

Read Maryland’s regional restaurant tax comparisons, pages 9–11

How much money could Montgomery County collect?

The Department of Legislative Services estimated that a 3% food and beverage tax could generate approximately $460 million annually statewide if all eligible local governments imposed the maximum rate.

That figure is a statewide scenario, not a projection of Montgomery County revenue.

The county’s actual collections would depend on qualifying food and beverage sales, the rate adopted, exemptions, the treatment of incorporated municipalities, and whether higher prices affected customer spending.

For illustration, every $100 million in qualifying annual sales would generate approximately $3 million in additional tax revenue at a 3% rate, before accounting for administrative expenses or changes in consumer behavior.

Those calculations are examples rather than estimates of actual taxable sales in Montgomery County. A credible county revenue forecast would require detailed local sales information and clarity about which businesses and purchases would be covered.

The legislation’s fiscal analysis also anticipated additional administrative costs for Maryland’s Comptroller’s Office, which would have been responsible for administering the expanded local tax.

Read Maryland’s fiscal analysis of HB 997

Would a new food and beverage tax reduce property taxes?

One of the principal arguments for expanding local taxing authority is that it could reduce government dependence on property taxes.

However, additional revenue would not automatically result in lower property taxes or other existing taxes.

The 2025 legislation did not require counties or municipalities to reduce existing taxes after imposing a food and beverage tax. Nor did it require the money to finance specific public projects or establish a defined endpoint for the tax.

The Maryland Tourism Coalition specifically raised this concern in its opposition testimony, arguing that jurisdictions could adopt the new tax while continuing to raise property taxes.

If Maryland eventually authorizes an additional food and beverage tax, local governments could decide to use the proceeds to maintain existing services, finance capital improvements, address budget shortfalls, offset future tax increases, or fund new expenditures.

Whether the revenue would reduce an existing tax burden or simply expand government resources would therefore depend on subsequent budget decisions.

That is an important distinction between generating additional revenue and delivering actual tax relief.

What happens next?

The 2025 proposal to authorize local food and beverage taxes failed to advance, but Maryland’s subsequent creation of the Task Force to Modernize County and Municipal Revenue Structures has kept the subject under consideration.

The task force, chaired by Comptroller Brooke Lierman and established through legislation sponsored by District 20 Delegate Jheanelle Wilkins, is expected to submit its recommendations by December 1, 2026. The October 2 presentation provides information for that process but does not represent a final recommendation or authorize counties and municipalities to impose the tax.

For Montgomery County residents and businesses, several questions remain unresolved. How much additional revenue would the tax generate, and how would it affect restaurants already facing higher food and labor costs? Would consumers change their spending habits, and how would the tax burden be distributed among households with different incomes?

Equally important is what the money would be used for. Ocean City’s convention-center tax offers one example of a narrowly dedicated funding source, while the broader 3% authority proposed in 2025 would leave local governments substantially more discretion.

The legislative record establishes that restaurant, tourism, hotel, beverage, and business organizations were actively opposed when the proposal was introduced. Their concerns included higher consumer prices, the competitiveness of local businesses, and the absence of requirements to use new revenue for defined purposes or provide relief from existing taxes.

At the same time, the Department of Legislative Services has identified potential revenue benefits and cited evidence suggesting that food and beverage taxes generally have not discouraged restaurant consumption.

As Maryland considers whether to expand local taxing authority, the central questions for Montgomery County are how much additional revenue governments need, who would ultimately pay for it, and whether that money would reduce reliance on existing taxes, finance specific public investments, or become another source of general operating revenue.

Any future food and beverage tax would require further action by Maryland lawmakers and subsequent local decisions about its rate, scope, and use of revenue. Those decisions would determine what the proposal ultimately means for Montgomery County residents, consumers, and businesses.

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