County To Begin Audit Program For Room Occupancy Tax Collections

County To Begin Audit Program For Room Occupancy Tax Collections

County To Begin Audit Program For Room Occupancy Tax Collections Featured

By / Local News / Wednesday, 21 March 2018 18:12

By WILLARD KILLOUGH III
Managing Editor

NEW HANOVER CTY - The New Hanover County Board of Commissioners unanimously approved spending $41,000 dollars during their March 12th, meeting to hire a company to audit local properties being rented through online services like AirBNB as short term rentals.

The purpose is to track how many property owners are renting accommodations through online services and whether or not they are paying the County's Room Occupancy Tax the same as hotels, motels and other short term vacation rental accommodations.

According to Lisa Wurtzbacher, Chief Financial Officer for the County, "New Hanover County collects a six percent ( 6 %) room occupancy tax on gross receipts from short term lodging sales. It is used to provide important services to the residents and visitors of New Hanover County, most notably being used for coastal storm damage reduction efforts at all three beaches, operations of the Wilmington Convention Center, and promotion of tourism and various tourism activities. Room occupancy tax should be collected and remitted to New Hanover County on a monthly basis. The tax applies to all lodging providers whether that provider be a hotel, motel, inn, bed & breakfast, rental home, rental room, etc. The increasing presence and use of vacation rental by owner sites such as Airbnb and HomeAway has made it increasingly difficult to determine if all required room occupancy tax is being collected by New Hanover County. These websites are numerous and are time consuming to search to determine if all properties are collecting and remitting its room occupancy tax."

She explained, "Staff is requesting approval of a more robust audit program to monitor the collection and remittance of room occupancy tax. This program would incorporate the use of an outside software vendor that is able to search all vacation rental websites, locate properties that have likely provided short term lodging, and provide information to the County about the potential stay. The County would use that information to contact taxpayers, inform them of the requirement to remit and collect room occupancy tax, and collect any room occupancy tax that may be due."

Wurtzbacher said the County will also implement an online system to allow rental property owners to file and pay their Room Occupancy Taxes through the County's website rather than being required to mail in paper forms with their payments.

She explained, "This will not only allow the County to collect the information it requires for an effective audit program but will also provide a more convenient method for payment of the tax."

Wurtzbacher explained the The Tourism Development Authority (TDA) adopted a resolution on October 25, 2017 in support of the program and, "The cost of the software will be $ 41,000 annually, which consists of $26,000 for the compliance software and $ 15,000 for the online filing and payment system, and will be paid from room occupancy tax collected. Staff anticipates that the increase in room occupancy tax collected will cover the cost of the software. It is anticipated that the audit program and online portal will be operational July 1, 2018."

During the meeting Commissioner Skip Watkins explained, "It came to my attention about a year and a half ago, that some folks just don't pay the ROT. I was fortunate enough to do some research and find someone who seemingly has the best answer to the ROT and Wurtzbacher and her staff have vetted several potential candidates... and this one has come to the top of the file. The intention of the ROT for me is, it's the law and we have people who some may or may not pay it, but this should vet out the majority of those that don't."

Commissioner Jonathan Barfield explained, "Just in case people don't know what ROT stands for, it stands for Room Occupancy Tax. It's our way to make sure that folks staying in some of those vacation rentals here, ones that own those properties, are also paying their fair share of taxes. If you stay in a hotel those hotels are going to collect the tax automatically and it will be on your hotel bill. There are a number of vacation rentals here managed by real estate companies, managed by private individuals that may not report and it's our goal again to encumber those that are not reporting. We take those dollars and it helps us, number one, put sand on our beaches. Some of those dollars are used in the city of Wilmington to pay for the Convention Center, for marketing and those kinds of things as well."

He explained, "Those dollars really help us market our region. When you look at Myrtle Beach they have a thirty plus million dollar marketing budget verses a couple of million dollar marketing budget here for our region. So as much resource we can bring in we can keep sand on our beaches but also promote the area and bring more visitors here as well. That's the big push here."

How the ROT is used:

The first 3% collected is distributed at 60% for beach nourishment and the remaining 40% is to be used by the TDA (Tourism Development Authority) to promote travel and tourism throughout New Hanover County and shall not be used to plan, construct, operate, maintain or in any way promote a civic center, convention center, public auditorium or like facility.

The additional 3% collected in each individual beach community (Carolina Beach, Kure Beach and Wrightsville Beach) is dedicated to establishing two funds each to be used exclusively for that beach; at least one-half of the tax collected is to be used to promote travel and tourism and the other fund is for TDA approved tourism related expenditures that are designed to increase the use of lodging facilities, meeting facilities or convention facilities or to attract tourists or business travelers to the area and includes tourism-related capital expenditures as approved by the TDA Board of Directors. For example, funding lifeguard programs.

For example, the Room Occupancy Tax Rate for Kure Beach is 6% and the combined State and County Sales Tax Rate is 7% for a total of 13% on a hotel bill. July 2015 to the end of June 2016 the Town of Kure Beach generated ROT revenues of around $880,000. In 2016, the Town of Kure Beach researched online rental sites and drove around Town looking for "Rental" signs. They identified 241 rental properties. The County Tax Office said at the time the Town had 98 open accounts for ROT collection.

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