Municipal Occupancy Tax Drives Home Discrepancy in Established Businesses, New Business

Jan 30, 2019
File Photo by: Ryan Morrill Islander Motel on Central Avenue in Ship Bottom.

When the state Division of Taxation approved a new tax permitting municipal officials the ability to establish an occupancy tax on all hotel and motel rooms within its borders, it probably didn’t consider the small-business owner. Before unanimously adopting an ordinance creating the tax, the Ship Bottom Borough Council did.

Still, Anne Clarke, who has owned the Islander Motel on Central Avenue for more than a decade, is subject to the 3 percent occupancy tax under Ordinance 2019-02.

“I understand we need revenue,” Clarke told the council after it unanimously adopted the ordinance Jan. 22. “My revenue comes from the rooms. We can’t compete with the bigger (hotels/motels). This 3 percent is going to attack us. It’s not good for us.”

Clarke described the 15-room motel as family-oriented, not a party place.

“We’re on site,” she said, noting when she and her family raised the rates by $5 and $10 after Superstorm Sandy, the annual renters were upset. “It’s getting harder and harder (to compete).”

Her concerns weren’t lost on the council, and Mayor William Huelsenbeck said the borough was in talks with the state right up until the last possible moment to determine if it could exempt hotels or motels with 25 rooms or fewer.

“They said it was all or nothing,” Huelsenbeck said, noting the borough couldn’t afford not to impose the occupancy tax with the new Hotel LBI slated to open. The new hotel at the entrance to the Island will have 105 rooms. “My heart is with the people who have been here a long time.”

The Municipal Occupancy Tax, according to the Division of Taxation, permits charges for the rental of transient accommodations such as hotel and motel rooms. The majority of municipalities that have chosen to adopt the occupancy tax have done so at a rate of 3 percent.

“The hotel and motel room occupancy tax shall be in addition to any other tax or fee imposed pursuant to statute or local ordinance or resolution by any governmental entity upon the occupancy of a hotel room,” Ordinance 2019-02 reads, requiring all tax imposed by the measure to be paid by the purchaser. “A vendor shall not assume or absorb any tax imposed by this chapter.”

The ordinance further says a vendor cannot advertise or in any way suggest, directly or indirectly, that it would assume the burden of paying the tax to a person or the public. Nor can it suggest the 3 percent occupancy tax would be refunded to the consumer.

“Each assumption or absorption by a vendor of the tax shall be deemed a separate offense, and each representation or advertisement by a vendor for each day that the representation or advertisement continues shall be deemed a separate offense,” according to the measure, which sets a $1,250 penalty for each offense.

The tax is collected on behalf of the borough by any individual collecting the rent from a hotel or motel customer, the ordinance reads. Each person responsible for collecting the tax is personally liable for the tax.

“Any such person shall have the same right in respect to collecting the tax from a customer as if the tax were a part of the rent and payable at the same time; provided that the Chief Financial Officer of the Borough shall be joined as a party in any action or proceeding brought to collect the tax,” according to the measure.

The ordinance will become effective on the first day of the first full month after 90 days from the date of the transmittal to the state treasurer. It was introduced on Jan. 2 in Ship Bottom, and a public hearing was held Jan. 22. Council President Edward English and Councilman Peter Rossi were absent from the meeting.

— Gina G. Scala

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