Staying power: County occupancy tax’s potential economic impact | News

AVERY COUNTY — The Avery County Board of Commissioners is pursuing the implementation of a county-wide occupancy tax after similar measures were stalled in previous decades.

The motion the commissioners approved at the last county meeting requests the General Assembly to grant approval to the county in order for the board to level the new tax on lodging such as hotels, motels, Airbnb rooms and other short-term rentals. As a local bill, the legislation only needs approval by a handful of legislators to be enacted.

In the meantime, the commissioners are working out the nuts and bolts of the new tax while waiting to receive a response from Raleigh. Commissioner Dennis Aldridge said the General Assembly would effectively grant the county the ability to implement an occupancy tax as high as six percent, although a lesser amount is being considered.

“The maximum is six percent, and I think we can utilize anything up to and including six percent. I think the local municipalities use six percent, but that does not necessarily mean we’re going to do that,” Aldridge said. “For years, we haven’t had any occupancy tax outside of the municipalities, and what this is going to do is it’s not only going to impact the traditional hotel/motel industry, but also the short-term rental industry, which has really blossomed up here.”

The municipalities that Aldridge refers to would include the town of Banner Elk, the village of Sugar Mountain, as well as the towns of Beech Mountain and Seven Devils, with the latter two being in both Avery and Watauga counties. Each municipality has an occupancy tax rate of six percent, and in the fiscal year 2015-16, tax revenues through the tax ranged from $100,000 to $250,000 for the four municipalities.

Regionwide, Avery is the only county without an occupancy tax. Watauga County has an occupancy tax of six percent, whereas Mitchell’s is three percent, Yancey’s is three percent, McDowell’s is five percent, Burke’s is six percent, Caldwell’s is three percent and Ashe’s is three percent.

“The major drive for me after looking at some of the numbers from the neighboring counties and towns is that it’s a benefit that the local county receives without the local residents having to pay it. It’s totally from people who are coming in, so it’s no burden on the local taxpayers in any way, shape or form unless they rent a place,” Aldridge said. “I’m a fan of utilization format for fees and taxation. If you don’t utilize a service, you don’t have to pay for it, but if you do utilize a service then you are paying for that process. It puts the burden of payment on the people who are enjoying and using the facility and not the ones who own it.”

The other factor that the commissioners are taking into consideration are the tax revenues that the county could bring in through the short-term rental industry. Over the past decade, online services like Airbnb have allowed owners of cabins, mountain houses, apartments, condominiums and other properties to effectively create an income source from these assets. Over the years, this new business practice has spread across the county, whereas in the past, the available lodging was mostly centralized in Banner Elk, Beech Mountain and Sugar Mountain.

“That’s what we have discovered, and if you look on Airbnb or VRBO, there is a pretty wide distribution of available rental types,” Aldridge added. “The good thing is that those people who operate through those platforms, the taxes are collected and remitted by those entities. It is not incumbent on the individual property owner to maintain and remit and collect (the taxes). Whoever the renter is, they will pay it to BRBO or whomever, and they would remit it back just like the they do sales tax or anything else. It’s really not going to be a burden the local person. They will neither be paying or collecting it.”

Moreover, the state of North Carolina has been able to collect taxes off of the short-term rental industry since 2015. These taxes include a state sales tax of 6.75 to 7.5 percent of the listing prices, in addition to any cleaning and guest fees for reservations of less than 90 days. The state also imposes both a statewide tax of 4.75 percent, as well as a local tax of 2 to 2.75 percent, which varies by county. City and county occupancy taxes are then added on to the price of the booking, thus allowing Airbnbs to be taxed at the same rate as more traditional hotels and motels.

However, the concern from many business owners, specifically in the lodging industry, is that too much taxation and regulation places an unnecessary burden on their business and can potentially drive away customers who choose where to stay based on price considerations.

Troy Clark, who is the former owner of the Pineola Inn and served as a county commissioner in Avery for 10 years, explained why previous boards did not pursue an occupancy tax, and why it may be beneficial for the county to do so now.

“The reason that we were always against it was because the towns were able to use theirs for the town and there were less than 100 rooms in the county that were going to have to pay the tax. The problem that I see with it is there will be three less motels than there were back in the day, like the Times Square is out of it, the Huskins Court’s out of it and the old Pineola Motel is out of it. It can be good if they go after the Airbnbs and overnight rentals. There’s probably more than a thousand of them going on in the county,” Clark said.

Clark sold the Pineola Inn to a new owner back in February and said he now centers his business on overnight rentals. The Clarks were the ones who first started the inn and ran it for the past 40 years to take care of those visiting the county. Clark said that added taxes and changes to the market can make it more difficult for a business to compete.

“I feel like I gave my customer a reasonable rate, and I think to add more (taxes) to it, I think it affects my business. I just don’t agree with adding more and more and more,” Clark said. “(Competing with the Airbnbs) is one reason why we got out of it, because the Airbnbs were really cutting in. If a tax were to go through, we would have to pay 13 and a half percent, and you add that to your room, that runs prices up.”

“We were all conservative business people, and that’s where we all tried to come from, was to try to save as much money as we could and that way we could give the taxpayers as much a break as we could. Different commissioners have different angles, but that was ours,” Clark added.

When asked to comment on how an added occupancy tax could affect local businesses’ ability to compete with regional lodging rates, both commissioners Dennis Aldridge and Blake Vance thought that a countywide occupancy tax was too minimal to a make a customer choose a different room based on the added prices and fees alone, since taxes and fees are calculated at the time of purchase and not when initial price comparisons are done.

“Other than Avery County, I don’t know of anywhere that doesn’t have an occupancy tax. You go to Pigeon Forge or Charlotte, you go find a hotel in Boone and you’re going to pay an occupancy tax. I can’t imagine a situation where anybody would pay attention (to the specific tax). It’s not something I think about. I look at the bottom line of how much the hotel room costs and I don’t pay any attention to the associated fees, typically,” Vance said. “You just expect to pay tax.”

Based on a quick price comparison search, a customer can expect to pay a nearly identical amount of taxes and fees for similar hotel rooms in Boone and Banner Elk, with current tax rates in place. According to each company’s websites, one room for two adults at the Best Western in Banner Elk for one night on a weekend in June runs at $179.99 with taxes and fees at $22.95. Similarly, one room for two adults at the Holiday Inn Express in Boone for one night on the same date runs at $179.10, with taxes and fees at $22.84. Taxes and fees are based on an estimated total according to information provided by the hotel.

Aldridge explains that as it currently stands, the revenues collected from a county occupancy tax would be earmarked for the county’s equivalent of a tourism development authority.

“It’s very specific on how that money can be utilized. It does not just go into the general fund. There are parameters and limitations on what it can be used for in terms of promotion, tourism, expansion of facilities or development of things for tourism and outreach. A board will have to be established. The EDC (economic development committee) is an all-volunteer board and it’s really not tasked with this particular responsibility, but part of the structure, once we get into the nuts and bolts of the draft, was that a form of a TDA (tourism development authority) or governing body would have to be established and maintained in order to supervise and oversee the expenditures,” Aldridge said.

“Anytime you throw out the word tax, there’s a shirking back. I’m a pretty fiscal conservative and not about undue spending, but to me this is a no-brainer in terms of what’s being left on the table that we could use to build up the county in a very positive way,” Aldridge added.

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