The way the city of Roswell collects taxes from short-term rentals such as Air BnBs, as well as hotels, motels, RV parks and other lodging businesses, could change soon as city staff work to adapt to new state laws regarding lodgers’ taxes.
If approved, the changes could mean more revenues for the city –- and more reporting logistics and taxes for the local lodging industry.
Interim City Attorney Parker Patterson, Director of Public Affairs Juanita Jennings and Tourism Manager Stephanie Mervine have introduced a proposed amended ordinance that would change Article 1, Chapter 23 of the Roswell City Code pertaining to lodgers’ taxes. A new ordinance can be enacted only after a public hearing to allow citizens to weigh in on the proposal.
Following a Roswell City Council Finance Committee recommendation Thursday that the City Council consider the issue, the governing body is expected to vote July 9 on whether to hold a public hearing on Aug. 13. If the City Council approves the ordinance after a public hearing, the changes would be implemented Aug. 21, according to city staff.
“These changes were implemented by the state of New Mexico, and the city of Roswell is updating the ordinance in order to comply,” Jennings said. “These changes level the playing field for the industry across the state, and we would like all tourism industry partners to know we are here to support them in any way we can, as we know how vital they are to our community.”
The suggested changes are coming as a result of two state laws, Senate Bill 106 that passed the New Mexico Legislature in 2019 and took effect Jan. 1 of this year; and House Bill 117, which passed during the 2020 legislative session and took effect July 1.
According to existing city code, lodgers’ taxes are 5% of the amount paid for a room or short-term accommodations, and the taxes are remitted on the 25th of the month following the month the rental fees are collected.
SB 106 affects lodgers’ tax collected on short-term rentals. These are typically rooms or vacation homes rented out by individuals, partnerships or corporations. In the United States, there are thousands of short-term rental management companies, including the well-known AirBnB and Vrbo.
Previously, the state lodgers’ tax laws exempted properties with fewer than three rooms. But SB 106 eliminated that exemption, so all short-term accommodations in Roswell would be required to collect and remit lodgers’ taxes if the ordinance is adopted and the city code changed.
According to Jennings, the city has about 64 of these types of properties and is estimating that it could receive an additional $30,000 in lodgers’ taxes a year if the new ordinance is adopted.
HB 117 is more complicated, but it is meant to allow local governments to receive lodgers’ taxes from people who rent hotel or short-term accommodations for extended periods because of their work.
Previously, state law gave an exemption for lodgers’ taxes after the 30th day at a hotel, motel or other short-term accommodation. But HB 117 changed the law so that rooms occupied for more than 30 days by people who are staying to be close to a job or place of employment are subject to the tax. That change came, in part, as a result of the oil and gas boom starting in 2018 that led to oilfield workers occupying hotels and motels in southeastern cities for long periods of time. Among other consequences, that meant counties and cities received less in lodgers’ taxes.
To update city code to comply with HB 117, the proposed city ordinance would collect lodgers’ taxes for work-related “temporary lodging” of 31 days or more, and will require the lodging business to report which taxes were collected for stays of 30 days or fewer and which were collected for 31 days or more.
“It could be up to an additional 20% increase of our current lodgers’ tax collections,” Jennings said.
The city collected an average of $260,425 a year in lodgers’ taxes for the three fiscal years of 2017-18 to 2019-20, according to city documents, which also indicate that there are now about 1,344 rooms available a night in the city.
The new state also allows the “temporary lodging” portion of the taxes to be used for any purpose the local government entity wants, as long as those uses are specified.
Ordinarily, lodgers’ taxes can be used only for costs associated with the administration of the taxes, for public safety related to tourism venues, for revenue bond payments, and to promote tourism attractions, facilities and related endeavors, such as airline flights.
The pending city ordnance is suggesting three purposes for the temporary lodging portion of the local taxes: construction and maintenance of city-owned tourism and sports-tourism attractions and facilities; public safety and community development; and city economic development.
Jennings said that lodging vendors should be aware of the new state laws due to their participation in the industry. She also said the proposed ordinance is posted on the city’s website as part of the Finance Committee agenda packet and will be included in the Roswell City Council agenda packet when that is posted.
“However, we will be connecting with them once adopted by the City Council,” Jennings said.
She said the city plans to relaunch its Roswell Hotel & Hospitality Association and that Tourism Manager Stephanie Mervine will be coordinating with the hospitality industry and managing the lodgers’ tax program for the city.
Senior writer Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at email@example.com.