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OCCUPANCY
TAX GUIDELINES
Since 1983, the General Assembly has
authorized many units of local government to levy
a room occupancy tax.
In several instances, the General Assembly
has authorized both a county and a city within
that county to impose an occupancy tax. The rate
of tax, the use of the tax proceeds, the
administration of the tax, and the body with the
authority to determine how the tax proceeds will
be spent vary considerably.
Over the past several years, there
has been a greater effort to make the occupancy
taxes uniform. In 1997, the General Assembly enacted uniform municipal and
county administrative provisions for occupancy tax
legislation – G.S. 153A-155 and G.S. 160A-215.
These provisions provide uniformity in the
areas of levy, administration, collection, repeal,
and penalties.
The North Carolina Travel and Tourism
Coalition has a policy statement for legislation
authorizing local occupancy taxes.
Many of the principles contained in its
statement are similar to the ones established by
the House Finance subcommittee in 1993.
Based upon this work, the House Finance
Committee looks for the inclusion of the following
uniform provisions in the occupancy tax bills it
considers:
¨
Rate –
The county tax rate cannot exceed 6% and the city
tax rate, when combined with the county rate,
cannot exceed 6%.
¨
Use –
Two-thirds of the proceeds must be used to promote
travel and tourism and the remainder must be used
for tourism related purposes.
¨
Definitions
The terms “net proceeds”, “promote travel
and tourism”, and “tourism- related
expenditures” are defined terms:
Ř
Net proceeds –
Gross proceeds less the costs to the city/county
of administering and collecting the tax, as
determined by the finance officer, not to exceed
3% of the first $500,000 of gross proceeds
collected each year and 1% of the remaining gross
receipts collected each year.
Ř
Promote travel and tourism
– To advertise or market an area or activity,
publish and distribute pamphlets and other
materials, conduct market research, or engage in
similar promotional activities that attract
tourists or business travelers to the area; the
term includes administrative expenses incurred in
engaging in these activities.
Ř
Tourism-related expenditures
– Expenditures that, in the judgment of the
Tourism Development Authority, are designed to
increase the use of lodging facilities, meeting
facilities, and convention facilities in a county
by attracting tourists or business travelers to
the city/county.
The term includes tourism-related capital
expenditures.
¨
Administration –
The net revenues must be administered by a local
tourism promotion agency, typically referred to as
a “Tourism Development Authority,” that has
the authority to determine how the tax proceeds
will be used, is created by a local ordinance, and
at least 1/2 of the members must be currently
active in the promotion of travel and tourism in
the taxing district and 1/3 of the members must be
affiliated with organizations that collect the
tax.
¨
Costs of Collection
– The taxing authority may retain from the
revenues its actual costs of collection, not to
exceed 3% of the first $500,000 collected each
year plus 1% of the remainder collected each year.
¨
Beach
Nourishment – During the 2001 Regular Session, the
Occupancy Tax Subcommittee of the House Finance
Committee considered several bills authorizing the
use occupancy tax proceeds for beach nourishment.
Although "beach nourishment" was
not among the uses contained in the uniform
guidelines, the subcommittee nevertheless
concluded that beach nourishment was an acceptable
expansion of the occupancy tax use provisions.
In doing so, the subcommittee drafted a
uniform definition of beach nourishment for use in
occupancy tax legislation.
The subcommittee defined beach nourishment
as:
The placement of sand, from
other sand sources, on a beach or dune by
mechanical means and other associated activities
that are in conformity with the North Carolina
Coastal Management Program along the North
Carolina shorelines and connecting inlets for the
purpose of widening the beach to benefit public
recreational use and mitigating damage and erosion
from storms to inland property. The term includes
expenditures for the following:
a.
Costs directly associated with qualifying
for projects either contracted through the U.S.
Army Corps of Engineers or otherwise permitted by
all appropriate federal and State agencies;
b.
The nonfederal share of the cost required
to construct these projects;
c.
The costs associated with providing
enhanced public beach access; and
d.
The costs of associated nonhardening
activities such as the planting of vegetation, the
building of dunes, and the placement of sand
fences.
¨ Conformity with Other Local Occupancy Taxes –
In the event legislation is introduced seeking to amend an existing occupancy tax, the Coalition will work with members of the General Assembly to ensure the existing tax is brought into conformity with the above guidelines. Similarly, if a city seeks to impose a new occupancy tax on lodging facilities in a county that already has an existing occupancy tax (or vice versa), then the Coalition will work with members of the General Assembly to ensure that the existing county tax is brought into conformity with the guidelines before supporting the addition of a new municipal tax. |
