Fans buy drinks at a Globe Life Field bar during the World Series, where Delaware North Sportservice added sales tax on top of the listed price. (Courtesy Texas Rangers)
With cashless, tax now more often tacked on to listed price
The shift to cashless concessions at sports venues has multiple benefits for teams, vendors and fans, but one byproduct has gone under the radar — the sales tax applied to the sale of hot dogs, beer and other items.
The way the tax is being treated as part of an all-cashless environment is generating additional revenue for teams and concessionaires, although it’s effectively increasing what fans pay for concessions, even with the much ballyhooed fan-friendly pricing model at Mercedes-Benz Stadium.
During the pandemic, teams and their third-party providers have accelerated the transition for accepting credit and debit cards to pay for food, drink and merchandise by eliminating cash payments altogether.
It’s positioned as a safety measure to prevent the spread of germs from handling cash. The technology is designed to improve speed of service by reducing lines at concession stands. Plus, vendors recognize that fans tend to spend more money when using credit cards.
As part of the cashless trend, more teams and vendors are tacking sales tax on top of the retail price listed on the menu boards, driving higher prices. Previously, when cash was accepted, the sales tax was typically folded into the price listed for food and drink.
The combined rate for state and average local sales taxes falls between 5% and 10% in most states.
Now, with new mobile point-of-sale systems installed at many venues, the sales tax has become a separate line item, similar to the business model at restaurants and retail stores outside of sports facilities.
“I’ve started to see that (tax) creep into a couple things,” said food and retail consultant Chris Bigelow.
When cash was the preferred method of payment, concessionaires, for example, may have charged $10 for a beer, keeping $9 and paying $1 in taxes, Bigelow said. Now, they can sell that same beer for $11 with sales tax, given that many customers don’t look at their credit card receipt, if they ask for a receipt at all, he said.
The net effect is the concessionaire and the client can potentially earn up to 10% more on some items.
“The point-of-sale suppliers recommended doing that years ago when people first started using these systems,” Bigelow said. “That’s one of the advantages; you don’t have to have somebody manually adding up tax in their head. People are used to it at McDonald’s or anywhere else; sales tax is always added on. But this is the first time I’ve seen where a lot of (teams) now are doing it.”
Most teams and concessionaires contacted for this story declined to address the sales tax issue.
“The concessionaires don’t like to talk about it, but what they’re saying (privately) is this whole COVID thing is costing us a lot more money, so we have to look at everything we can to try and recoup that,” Bigelow said.
“It makes sense,” he said. “When it goes back to normal (with full crowds), they won’t stop doing it. The cashless thing is here to stay.”
The Green Bay Packers are one team that doesn’t add sales tax on top of the menu board price at Lambeau Field, said Charlie Millerwise, the team’s director of hospitality and development. Delaware North Sportservice runs the food at the stadium, which recently converted to a cashless operation. (As of early November, no fans were allowed to attend Packers home games).
“It’s a matter of how you approach your concessions pricing,” Millerwise said. “We wouldn’t want to hit fans with an extra 5.5% on top. There could be some folks that are a little opportunistic, but at Lambeau, if it’s on the menu board, that’s what you’re paying.”
Part of the issue is the receipt printers have been eliminated under some point-of-sale systems, and fans may not see the tax until they get their credit card statement, said Mike Plutino, founder and CEO of Food Service Matters, another food consultant.
Some systems such as Square, which is installed at Chase Center and SoFi Stadium, provide sales receipts via text that are linked to the user’s profile. With other platforms, though, fans must ask for a receipt if they want one at the time of purchase.
“We don’t want to be pecking in your email address at the concession stand,” Plutino said.
Mercedes-Benz Stadium, home of the NFL Atlanta Falcons and MLS Atlanta United FC, became one of the first venues to go cashless in 2019. At the same time, AMB Sports and Entertainment, which runs the stadium and owns both teams, added 8.9% sales tax to each purchase, as reported in the Atlanta Journal-Constitution.
AMB Sports controls the food operation, which is distributed through its vendor Levy.
Considering some of the higher-priced items offered at Mercedes-Benz Stadium, the sales tax offsets the savings for fans purchasing $1.50 hot dogs. Last year, AMB Sports and Entertainment reduced the cost of hot dogs from $2, along with other drops in 50-cent increments for burgers, pretzel bites, chips and salsa and ice cream.
“The Falcons showed this to us when they took an 8% increase in going cashless,” Plutino said. “They said, ‘We’re going to further lower our fan friendly pricing and are going cashless.’ Well, they essentially raised prices on most items. The average fan is not connecting the dots that the tax was built in prior to that.”
Heather Sautter, a spokesperson for AMB Sports and Entertainment said in an email, “Cashless allows for us to be a little bit more flexible in pricing. We account for tax just as any other business does now. It’s not a new concept and fans are accustomed to it in retail terms.”
Plutino agreed with that assessment.
Early in the cashless movement, there has been no pushback from fans on the sales tax issue, he said. From talking to his clients hosting fans during the pandemic, transactions are going quicker as intended, Plutino said.
“If anything, much of the industry has been held back for years, because we wanted even dollar (pricing),” he said. “We didn’t raise the price for four years and then raised it a dollar. (Sales tax) is not recognizable by the average fan. This is one of the unintended benefits.”
A second unintended benefit is that nonprofit groups working concessions have seen a small increase in commissions from fans adding tips to their credit card payments as an option with their purchase, Plutino said.
The tips help those groups survive during the COVID era, which is critical, considering vendors have struggled in general to find part-time labor over the past few years, he said.
The uptick in tips is evident at Davis Wade Stadium, Mississippi State University’s football venue in Starkville. The SEC school’s athletic department is a Food Service Matters client.
Proof of the Pudding, in its first year running concessions at Mississippi State sports venues, installed a new Bypass point-of-sale system this year. For the first two home games of the 2020 season, nonprofits have seen an average 5% increase in tips over the 2019 season.
The cashless technology helps get the tip buckets off the counter, “which is always kind of cheesy,” Plutino said.
“Fans are OK with it,” he said. “They know it’s tough times and people are working hard. (Nonprofits) have been banking 10% for their cause and now have another incentive to walk away with 15%.”
As part of fans’ acceptance for going cashless, the reverse ATMs that teams install at venues to convert cash into debit cards are becoming unnecessary, Plutino said. The usage rate is less than 2% at Mercedes-Benz Stadium.
Some clubs are selling that same debit card at the team store to the handful of fans that only carry cash. It’s one solution in states such as California that require cash as an option for payment without teams having to pay thousands of dollars for the reverse ATM machines.
“They’re costly and the transaction fees are high (at 3% to 8%),” Plutino said. “They’ll fall by the wayside quickly in favor of a retail location that can provide a debit card that’s usable anywhere Visa and Mastercard are accepted.”