Hilton Head Island is considering changing regulations to require even small or informal renters of vacation properties to get a business license and pay the various taxes and fees charged to other hotels and timeshares.
The change could provide a boon for the town's bed tax and beach preservation funds, which come from taxes on overnight rentals. But it could cause complications for the common practice of casual rentals advertised through workplace bulletin boards or newspaper classifieds instead of conventional property management companies.The issue was raised by a coalition of property management companies who earlier this month sent Mayor Tom Peeples a letter saying the town and state could be missing as much as $2.5 million, $750,000 of which would go to the town, from owners who rent their properties directly. The group determined that figure by counting the number of properties on a popular Web site and calculating average rental income. The concern is also that, if sites such as Vacation Rental by Owner (VRBO.com) continue to grow in popularity, tax revenue will continue to shrink over time as owners who may not know about the taxes bypass the traditional rental companies.
Bed taxes are used by the town as a crucial source of paying for both beach preservation and tourism-related enterprises or organizations.
"Companies like us and all the others, we have employees, we pay salaries, we contribute to the local economy," said Ray Moloney, president and owner of Beach Properties of Hilton Head, which rents about 200 properties on the island. "All the out-of-town folks, they collect revenues in their home state and spend it in their home state. They don't contribute to the maintenance and upkeep of the town facilities."
The town requires property owners to get a business license only if they are renting five or more units. In response to the issue, the town will consider requiring renters of single units to obtain a business license, as well, town manager Steve Riley said. That will allow the town to have a database to check to see if owners are paying the appropriate taxes.
Riley said town staff are researching the regulations to see if there are any impediments to changing the law, but he said the town shares the concerns about the possible missed taxes.
"I want to make sure there isn't something under state law or some other reason that (the five-unit standard) is there," he said. "I really don't know why it's there. I'm sure years ago somebody had a reason."
The staff will probably make a recommendation on the issue sometime in January, he said.
In a letter responding to Moloney's concerns, Peeples said the town's revenue collectors regularly monitor various rental Web sites to look for owners who might be bypassing the law.
But one property owner who rents a condo on Shelter Cove Marina through Vacation Rentals by Owner said she doesn't consider renting a single property to be a business venture.
"It's private, it's personal property," said the owner, Melinda, who lives outside Atlanta and did not give her last name. "It's not a business."
She said that though she's new to the rental market, she doesn't need extra enforcement from the town. She has contacted state officials already to make sure she is paying the proper taxes.
"I've already looked into how we file and everything," she said. "I was told that's part of renting." |
