Editorials

Settlement a bright spot in bed-tax revenue picture

Hilton Head Island's settlement with discount travel websites over local taxes paid on hotel rooms is welcome, but not surprising, news.

The handwriting was on the wall that the companies would end up paying something after a state Supreme Court decision in January landed squarely on the government side of the dispute.

The town will get about $348,000, a nice infusion of cash at a time when budgets are tight.

That takes care of the lawsuit, and the Supreme Court decision sets out the rules going forward.

The town, the state and other communities have claimed in a series of lawsuits that the online travel sites are not paying all they should in accommodations taxes, which are levied on short-term lodging. The town charges 3 percent and also gets a share of the state's 2 percent bed tax.

The high court ruling in the state's lawsuit against Travelscape lays out clearly how the taxes are supposed to be collected. The total amount charged a person booking short-term lodging is the amount on which taxes are owed.

Travelscape had argued that the rate it paid to a hotel was the amount that taxes should be applied to. The difference between that rate and the amount the customer paid for the room was a service charge not subject to the tax.

But the Supreme Court said no. The tax applies to gross proceeds and the definition of gross proceeds does not allow for subtracting the cost of "materials, labor or service."

The court also rejected Travelscape's arguments that it didn't "furnish" rooms because it doesn't own or operate the hotels and that its activities fell outside the state's boundaries and so weren't subject to state taxes.

The court said that the law applies to entities "engaged in the business of" furnishing accommodations here, and that's what Travelscape does.

Town manager Steve Riley said the companies are required to abide by the town's tax collection process, and the town will collect what it thinks it is owed going forward.

That's good news. The local accommodations tax helps pay for key public safety services, such as police and fire protection, needed for the large numbers of visitors who travel here. On Hilton Head, it also pays for beach renourishment.

The state accommodations tax pays for critical tourism industry marketing programs and provides money for local nonprofit tourism and arts groups.

Other Beaufort County communities would do well to review their accommodations tax collection processes to make sure they get all the money they are owed for hotel rooms booked through online sites.

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