The city collects unpaid tourist taxes from hotels and rentals
SHEBOYGAN — About 230 short-term rental properties like Airbnbs are not paying lodging taxes due in Sheboygan, said the city’s director of planning and development, Chad Pelishek.
Sheboygan aims to change that with new software called Host Compliance.
The city council has previously approved the purchase of the software. On Monday, the council approved an increase in council tax permit fees from $20 to $100 a year to roughly cover the cost of the software.
When implemented in the coming weeks, Host Compliance will track short-term rentals in the city and collect quarterly room tax payments from them.
The city expects to collect between $300,000 and $500,000 more per year in room taxes thanks to the software.
In recent years, the city has collected an average of $1.3 million to $1.6 million in lodging taxes.
Under an updated ordinance passed by the Town of Sheboygan, Town of Sheboygan and Town of Wilson in 2017, hotels and short-term rentals must obtain an annual business license and pay an $8 tax. % which is added to guest room bills.
Each municipality keeps 30% of the taxes collected, and the remaining 70% goes to the Sheboygan Area Room Tax Commission for the promotion of tourism through Visit Sheboygan.
Pelishek, who is chairman of the commission, said the $20 annual permit fee made sense when it was established in 2017 because there was really no basis to compare fees at the time.
Raising the annual fee by $100 will yield about $25,000 per year, which nearly covers the annual cost of Host Compliance software, he said.
Collecting unpaid tourist taxes has been a ‘burden’ for the town of Wilson
The city of Wilson is not increasing the annual council tax permit fee, but plans to see if Host Compliance software can help the city as well, said city chairman John Ehmann.
“It comes down to dollars and cents,” he said.
Unpaid tourist taxes have been a long-standing problem for the city.
One hotel, the Sleep Inn, owes the city over $100,000 in unpaid city tax, according to a Sheboygan County Circuit Court ruling.
The city sued the hostel in 2018, but the operators of the property are leasing space from an investor group that owns the building and has few assets for the city, Ehmann said.
About $75,000 to $100,000 in room taxes a year go uncollected in the city, Ehmann estimated.
“It’s been a burden for the city to try to collect,” he said. “We consider a lot of it will be unrecoverable when budgeting, so it doesn’t hit our budget so much.”
Currently, the city does not charge a resort tax for residents who rent their homes short-term, but the city is considering implementing a short-term rental ordinance, he said.
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