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Taxes due on vacation rentals

According to Town Tourism Committee coordinator Jennie Green, the bulk of vacation rental properties throughout Pagosa Springs and Archuleta County fail to pay both lodgers tax and sales tax, not so much due to malfeasance, but more to do with a lack of knowledge regarding the town and county’s tax code.

Presenting to a joint work session of the Archuleta County Board of County Commissioners and the Pagosa Springs Town Council, Green said she had developed a Request For Proposal to find a vendor who would not only audit local vacation rentals, but would provide a database for tracking those properties. Green said that about $5,000 would be required up front for the database and the auditing process.

“There are in excess of over 200 vacation rentals out there that are not paying lodgers tax,” Green said. “We would need to collect on just 25 properties to break even,” Green added later. “Considering there’s at least 180 out there …”

Local officials, commissioners and council members in attendance appeared receptive to Green’s proposal.

Commissioner Clifford Lucero asked Green where the money would come from to pay for the proposal.

“Because of the revenue generation part of this, I think this is something my board would agree to pull out of reserves,” Green responded.

However, Archuleta County Administrator Greg Schulte thought that Green’s proposal was beneficial enough that the TTC should not bear the sole burden for funding. “I think the return on investment would be imminent,” Schulte said. “I think we should look around to see what our contribution would be in this.”

Karin Kohake, executive director of the Pagosa Springs Community Development Corporation, added, “The CDC has been talking about working with the TTC on this.”

However, the conversation shifted gear when Pagosa Springs Town Manager David Mitchem suggested switching the burden of sales and lodgers tax collection from the state Department of Revenue to the town and county.

“Municipalities that have self-collected (taxes) have seen a remarkable increase in revenues,” Mitchem said. Mitchem added that in order for the town and county to begin collecting taxes, a bill towards those ends would need to be passed through the state Legislature.

Schulte said that, due to the town’s home rule charter, he thought that the town would not need to appeal to the statehouse in order to collect taxes.

“No,” Mitchem responded, “it’s a county tax (the 4 percent sales tax).”

Mitchem added that he believed such a bill would easily pass.

While Green’s proposal met with universal approval at the June 2 joint town/county work session, it met some resistance at Tuesday’s June 7 town council meeting. After presenting her proposal, Green heard from council member Darrel Cotton (who was absent from the June 2 meeting) who said, “I have a problem with us policing.”

Green responded, “The intent here is not to police property owners, but more educational, to inform them about tax policies. There’s a potential for well over 200 properties that aren’t paying their taxes.”

Green went on to explain that many vacation rental property owners reside out of state and, while paying taxes in the states where they claim residence, they fail to pay local taxes, whether through ignorance of local tax requirements or through simple refusal.

Cotton was intractable, continuing to warn against the town, county or the TTC policing tax policy.

“You know what the State Patrol used to be?” Cotton asked rhetorically, “They used to be the Courtesy Patrol and they were there to help you change your tire or whatever. Now, they’re a huge revenue source for the state.”

Despite Cotton’s objection, the rest of the council members supported Green’s proposal and, with a motion by council member Shari Pierce and a second by council member Bob Hart to direct Green to pursue an RFP for developing an auditing database, council passed the motion with only Cotton opposing.

The town and county could soon be seeing a windfall from previously uncollected sales and lodgers taxes if Green’s proposal is realized. However, the more interesting question (brought up in the midst of the discussion) is whether or not the town and county will eventually take the burden of tax collection from the state and if that will result in increased revenues for both governments.

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