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Audit will target lodging owners in Haywood to deter room tax fraud

haywoodA dozen hotels, motels and tourist accommodations in Haywood County will have to open their books to auditors in coming months to prove they aren’t pocketing some of the room taxes they collect.

Overnight accommodations tack a 4 percent tax onto room bills and are supposed to turn it over monthly to the Haywood County Tourism Development Authority. 

But there’s never been a mechanism to know whether accommodations turn over all the tax they collect. 

“If they are collecting it and not paying it, that’s fraud,” explained Lynn Collins, executive director of the tourism authority.

Since it’s based on the honor system — lodging owners simply send in a check for what is collected each month — tourism authority members suspect some may be under-reporting how much business they do and pocketing some of the tax instead of sending it in.

“If we don’t have at least some kind of audit, there are a handful of people who would take advantage of that, knowing nobody will ever check,” said Mike Eveland, a tourism authority member with the Maggie Valley Inn. “If we don’t have this in place then we are pretty much leaving it wide open.”

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The tourism agency is hiring an auditing firm to check accommodations’ books, at a cost of $400 per audit. Up to a dozen will be selected a year.

Tammy Wight, a tourism board member who is against the idea, has raised concerns over the idea.

“I don’t see how this is going to be fair,” said Wight, who is also the president of the Maggie Valley Area Lodging Association and the owner of the Clarketon Motel.

The audit won’t be random. It will target specific lodging businesses, and that’s one of Wight’s concerns. 

The lodging business is competitive, and many of the tourism board members are in the industry themselves.  

“I asked how we would know who to audit and the comment that was made was ‘We know, people say things.’ I don’t think we should base an audit off of hearsay,” Wight said.

Eveland said criteria will be used to determine what accommodations are chosen.

But that criteria is still being developed.

“We will have a process for how we are going to pick and choose,” Collins said.

There’s around 300 lodging operations in the county — from large hotels to private vacation homes — and only 3 percent will be audited a year. The odds would be slim under a random audit that the real offenders ever get chosen.

So the audit will target accommodations with suspect numbers that don’t seem to jive, or those that are routinely delinquent in their remittance of the room tax, according to discussion at the tourism authority’s recent meeting on the issue.

For example, a motel that doesn’t send in any room taxes during winter months, claiming it was closed, yet has comments on Trip Advisor from people who stayed there during the winter, would be a prime candidate for auditing. 

The tourism authority will contract with Tax Management Associates out of Charlotte to perform the audits. The same firm was used for an audit a few years ago to find under-the-radar vacation rentals that weren’t charging the tax.

The discovery netted more than 50 new accounts, mostly among second-home owners who rent out their mountain houses a few weeks of the year. 

Collectively, vacation houses, rental cabins and villas account for half the tax that’s brought in each year, Collins said. 

An indirect benefit of that audit was the “publicity that it generated from people who did not realize they were supposed to be collecting the occupancy tax,” said Lyndon Lowe of Twinbrook Resorts in Maggie Valley, who chairs the tourism authority.

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