Homeowners on the West Side of Summit County who may be cashing in on nightly rentals while not paying taxes: consider yourselves warned.
Computer software purchased by Park City will now ferret out those without business licenses who are marketing rental properties online, Summit County Manager Bob Jasper said.
Park City and the Snyderville Basin have seen growth in nightly rentals and the lodging industry complains that some of those private owners are not paying taxes. But lodging deals made on the Internet are difficult to regulate. Jasper said the new software will cross reference tax and business-licensing records with information about properties posted online.
“I think they constantly do Internet searches and they look at what’s up for rent,” Jasper explained. “That can be sorted against property taxes, who’s paying [Transient Room Tax] and business licenses.”
Some of those renting nightly also claim those properties as their private homes, allowing owners to avoid costly business-licensing fees, property and sales taxes required of hotels, motels and other nightly establishments.
This violates the law and councilpersons hope to crack down on those renting their properties illegally.
“The driving force for the city is we’ve had complaints from our property management folks It’s a problem area,” Assistant Park City Manager Michael Kovacs said. “We’re losing quite a bit of funds that could be used for advertising to bring people to Park City or Summit County If they don’t have a business license they typically are not paying sales tax to the state of Utah.”
The illegal practice also negatively impacts the lodging industry, he said.
County officials intend to work with City Hall to find those who are renting their properties illegally. Park City has purchased software from a Maryland firm to identify offenders in the community.
“We’re going to make sure that the dishonest people are captured and brought into the base,” Kovacs said.
Some of the worst offenders list their properties on rental websites like craigslist.com and vrbo.com, he said. VRBO stands for “vacation rentals by owner.”
“[VRBO] has become a real problem site,” Kovacs said.
Those without business licenses who are renting their homes nightly often are not paying the Transient Room sales tax required of the local lodging industry.
Intent of the revenue collected from Transient Room Tax is used to promote tourism in the Park City area. City Hall hopes to recover some of that tax from offenders the new software will help track down.
Bill Malone, president and CEO of the Park City Chamber/Bureau, said he does not know how much of the 3 percent room tax goes uncollected.
“It’s part of the sales tax that the consumer pays when they stay,” Malone said. “Those properties that are legitimate and that are out there in the marketplace are the ones that are collecting the tax that drives the promotion of us as a destination for vacations When marketing budgets have declined because of downturns in the economy, we’re obviously looking for every advantage we can to put money back into the marketplace for advertising and promotion. So if there are properties that are participating in the nightly rental economy in the community, it’s only good to have them contributing to the overall efforts of marketing the Park City destination.”
The collection of property taxes is also at issue. County councilpersons have asked Courthouse officials to aggressively pursue those who rent their properties nightly while receiving tax breaks by claiming the homes as their primary residences.
People who own primary residences in Utah pay taxes on 55 percent of the value of their homes. The owners of second homes get taxed for 100 percent of the value. The owners of primary residences cannot profit from using their homes as vacation rentals, according to county officials.
“It’s costing everyone else in the county more in property taxes,” Summit County Councilman John Hanrahan said.
Lodging officials are aware of the nightly rentals being offered on the market illegally. Colorado Association of Ski Town representatives are cracking down on similar offenders in that state.