Superior finance panel makes changes to room tax law
Pandemic-related penalties could be reduced as city restructures hotel-motel ordinance.
A pair of appeals seeking relief from penalties for unpaid taxes could be rendered moot if the City Council adopts a resolution proposed by Councilor Tylor Elm and adopted by the city’s finance committee Wednesday, Sept. 23.
Elm proposed waiving penalties for hotel/motel taxes paid late for the first quarter of the year, only charging half the penalty for the second quarter of 2020 and restoring the full 25% penalty on any outstanding room taxes not paid by Oct. 31 because of the strain the pandemic has placed on the hospitality industry.
“This is a one-time thing regarding the pandemic,” Elm said.
The finance committee modified the proposal to reduce the penalty to 5% for each of the two quarters, following an amendment put forth by Councilor Jack Sweeney.
“That way it would be far more equitable,” Sweeney said.
Elm said at the time the first quarter tax payments were due, cash flow had stopped through no fault of the hotel operators.
The city took steps to assist businesses affected by the pandemic, said Councilor Keith Kern, and he could support the 5% penalty for both quarters.
“I agree with Jack; it has to be equitable,” he said.
Sweeney said the 5% penalty is reasonable and sends the message that people cannot just choose not to pay the tax.
“A heavy percentage of them paid it on time,” Sweeney said. “I don’t know what struggle they had to go through or what sacrifices they had to make.”
Budget Motel is appealing penalties for the second quarter of 2020, according to city documents. Oliver Companies is also appealing penalties, but for the first quarter for Holiday Inn Express, Hampton Inn and Barker’s Island Inn.
The $10 late filing fee will still apply, but penalties owed will be reduced if the council adopts the resolution.
In addition to reducing the penalties, the finance committee adopted changes to the city’s hotel/motel tax ordinance that will change how the city collects the room tax in the future. Instead of collecting the tax on a quarterly basis, hotel/motel operators would return the tax to the city on a monthly basis.
“We’ll be able to watch it much closer,” Sweeney said.
If monthly reporting had been in place, the hotels now facing penalties could have avoided the challenges they now face, said Taylor Pedersen, president and CEO of the Chamber of Superior-Douglas County.
“It makes sense to have it on monthly basis, rather than having us sit on it for three months, and charge us a 25% penalty,” said Colleen Anderson, chief financial officer for Oliver Companies. “I don’t think anybody expected a pandemic.”
Both proposals will be considered Oct. 6 by the council.