Charity Tax Mistake Likely Cost Resort Thousands

OCEAN CITY — An
interpretation of a state law by an unknown county official almost six years
ago could have cost the town of Ocean City upwards of a million dollars in room
and food and beverage tax collections.

In closed session at
City Hall on Tuesday, the City Council voted to write a letter to the Worcester
County Commissioners requesting that food and beverage as well as room tax be
collected from non-profit organizations, as per state law, starting Oct. 1.

“Basically, it was a
decision or an interpretation of the state’s law by someone in the county back
in 2004 whom decided that non-profits should be exempt from paying room and
food tax, just like they are exempt from sales and usage tax,” said City
Solicitor Guy Ayres. “It was brought to our attention that the non-profits are
not exempt from the room and food tax, and we are requesting that the county
change the policy, so we can collect the revenue starting Oct. 1.”

Councilman Joe Hall was
adamant in his hopes to clarify the fact the council was not instilling a new
tax on non-profit organizations, but rather, pointing out a mistake or a
mis-interpretation that has essentially robbed the town of Ocean City of
hundreds of thousands of dollars in tax revenue each year since the decision
was made.

“This isn’t a new tax,
it’s just a request to be able to collect what should be collected, and should
have been collected all along,” said Hall.

Ayres said that he spoke
with county attorney and former commissioner Sonny Bloxom about the 2004
decision, and no one is certain who made the call to exempt the non-profits
from room and food tax, but allegedly hinted that the county would make a move
to make the change back to the correct fashion.

“The state’s law allows
it, the county is supposed to impose it, and the town is essentially the
beneficiary of it,” said Ayres. “So, for any non-profit group that comes and
stays in Ocean City, they should be required to pay the room and food tax, but
they will still be exempt from the sales tax.”

Mayor Rick Meehan said
that town officials are uncertain to how much revenue was essentially lost
since 2004, and he said it was difficult to tell which hotels were giving the
exemption to the non-profit groups.

“We had made a request
to the County Commissioners to have an audit done on county records to get some
sort of an idea, but they have denied that request,” said Meehan.

Hall said that some
non-profit groups who have a long standing relationship with the town, such as
the Maryland Firemen’s Association, which has been coming to the resort for
decades, could feel as though the town is targeting them in hopes of squeezing
more revenue out of them.

“I hope they don’t think
this is something new, it’s just something that we should have known about and
fixed a long time ago,” said Hall.

From a city standpoint,
the money that would be collected each year from this proposed change, which is
estimated on the low end at $150,000-200,000 annually, would benefit the town’s
advertising budget (which partly gets funded by a percentage of the room tax
collected), and paying off the debt to the convention center (funded by the
food and beverage tax).
Still, Council President Joe Mitrecic says that the only negative is the
perception from the non-profit organizations who will see a change in their
bill when they are in town.

“The tax was in effect
until 2004, and for whatever reason, the county decided to take it out, but the
fact is that our auditor pointed out to us that it should have been collected
all along, and we are just asking the county to follow the law from here on
out.  We aren’t looking to recoup lost
revenue from years’ past,” he said.
 

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