Resort tax round table

Weighing in on what to tax and how to collect
“This current situation in Big Sky where only some skiers and golfers pay the tax is unfair.” —Big Sky Resort General Manager Taylor Middleton

In response to the last Big Sky Resort Area Tax Board’s subcommittee meeting held earlier this month, Big Sky Resort General Manager Taylor Middleton attended the second annual Resort Tax Summit, offering his two cents on the question of whether private club membership dues should be subject to the 3 percent resort tax.

“Currently, in Big Sky, some skiers and golfers pay the tax, and other skiers and golfers don’t pay the resort tax,” Middleton said at the Jan. 19 summit. “And that’s fundamentally unequitable. It doesn’t pass the straight-face test to the local voters, and it might not be constitutional in the state of Montana or the United States to tax unfairly. Either no skiers or golfers should pay the tax or all skiers and golfers should pay the tax. But this current situation in Big Sky where only some skiers and golfers pay the tax is unfair.”

That specific issue was not revisited in-depth at the Resort Tax Summit, as the discussion shifted to other challenges and goals of resort tax communities whose board members called in to the meeting hosted by the Big Sky Resort Area District. Those communities included incorporated West Yellowstone, Whitefish, Red Lodge and Virginia City, and unincorporated Cooke City and Gardiner.

Some, like Red Lodge, where resort taxes have been collected for nearly two decades, face few objections. While others, like West Yellowstone, are still trying to work out the kinks. In West, the chamber of commerce continues to raise concerns about taxing entrance fees. 

One challenge several call-in attendees agreed upon is the ongoing difficulty in actually collecting the tax in the first place. 

“I’ve been on the city council for a couple of years now, and one thing that I’ve noticed is that over time, and prior to my start on the council, is that a lot of the yearly auditing doesn’t take place or is difficult to get finished up,” said Virginia City Town Councilman David Bacon. “I think our biggest challenge is making sure that everybody is paying their fair share.”

Virginia City randomly audits two businesses each year.

“I can tell you in Big Sky it’s a big challenge for us, and recently we’ve added staff to help on the compliance front, and what we’ve found is the large of this is just a general lack of understanding,” said Resort Area District Board Vice Chair Kevin Germain. “We’re trying to get out ahead of it in a really proactive education front.”

Germain noted that every year the board randomly chooses 10 businesses to audit: “And this has been fairly standard practice for us… and something we will continue to look at is, is that enough as businesses are growing? Maybe that should increase. But I think we’ve found our biggest opportunity is just education.”

Besides education and collection, Big Sky and other communities agreed a pressing, current challenge is collecting the tax from short-term rentals like Airbnb and VRBO.

“That has been a major initiative by the team, finding a way to get on top of that, and we’ve actually purchased some software that will help us do those searches so we’re able to see who’s out there advertising on VRBO and not remitting resort tax,” said Germain. 

Resort Area District Board Chair Mike Scholz said that everyone in the short-term rental business is supposed to register with the state and pay an accommodation tax, and most counties require a public accommodations license, “But the interesting fact is that the two state agencies that require those don’t communicate together because of privacy laws... Right now the only way to find out about them is through the software we are just starting to use that really looks at who is advertising on the third-party sites, and trying to take that backwards. It’s a lot of work and it’s not easily done.”

The Big Sky Resort Area District will pay an annual fee of $10,000 for the use of the program STR Helper.

Whitefish Finance Director Dana Smith said they’re also moving forward with the same software, noting that a current study found Whitefish is “one of the fastest growing (locations for) short-term rentals in the state… It’s expensive, but it’s what we need to do to get that information.”

Smith said Whitefish was quoted at about $17,000 per year for the software.

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