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Wednesday, 30 January 2013 00:00

Audit finds vacation rentals dodging the lodging tax

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A company hired by the Haywood County Tourism Development Authority has found a dozen businesses that have been evading a 4 percent lodging tax.

 

The 4 percent tax is tacked onto the bill of overnight visitors — whether it’s a hotel, bed and breakfast or weekly cabin rental — and is supposed to be remitted back to the county. However, the TDA has struggled to bring some lodging owners into compliance. Either the lodging establishment is knowingly avoiding paying the tax to the county or is unaware of its responsibility to collect it in the first place.

To fix the problem, the tourism agency asked for the help of the Charlotte-based company Tax Management Associates, which created software that searches the Internet for vacation rentals in the county. People renting vacation homes and cabins under the radar are suspected as the biggest culprits.

The company then cross-references its findings with a list of lodging owners who are currently paying lodging taxes. If the business is not listed, Tax Management Associates will investigate further.

Lynn Collins, executive director of the TDA, told tourism board members last week that the company will soon start auditing the dozen renters to figure out how much each owes the county in lodging taxes. The company will receive 45 percent of taxes collected.

The audit process includes contacting the business to obtain their rates and to see how long the owners have rented the place. From there, Tax Management Associates can calculate how much the county is owed in lodging tax as well as penalties for late payment. The company will go back as far as six years.

Those renters must pay the full amount of taxes owed. However, lodging owners can appeal the late payment penalties to the county board of commissioners, but they must prove their case to get the fees reduced.

“The burden of proof is on the property owner,” Collins said.

Since becoming executive director of the tourism agency about five years ago, Collins said only one business has gone before the county commissioner to asked for a lesser penalty. Its fines for delinquent payments amounted to $85,000 — not including taxes owed, Collins said. The penalty was lowered to $25,000.

“The majority of those (dozen) folks will appeal their penalty amounts,” Collins said.

Since the commissioners may lessen the penalty amounts, Collins declined to give out any estimates of how much the TDA could receive from the newly discovered lodging establishments.

Suffice it to say, Tax Management Associates’ finds will bring in “a good amount of money,” Collins said.

— By Caitlin Bowling

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