County officials plan to pursue implementing a hotel-motel tax within Tullahoma and Manchester city limits.
The new tax, if adopted, would benefit the county’s coffers and would be added on top of the existing lodging tax in the cities. Both cities already have a hotel-motel tax of their own on the books – 5 percent in Tullahoma, and 6 percent in Manchester.
The Coffee County Commission will vote on Tuesday to request the Tennessee General Assembly change state law to allow Coffee County to adopt an occupancy tax within the city limits, on top of the cities’ taxes.
Though current law prohibits the county from levying hotel taxes in the cities, Coffee County Attorney Robert Huskey told members of the budget and finance committee that the law could be amended.
Members of the committee, Huskey and Stan Teal discussed the matter during the committee’s meeting on Wednesday.
Teal is a member of the Public Building Authority (PBA), the board that owns and operates the Manchester-Coffee County Conference Center.
Though the center has been operating in the red, losing $1.5 million the last four years alone, Teal argued the center benefits the area by way of boosting tourism and generating sales and hotel tax revenue, with Manchester City seeing the bulk of the profits.
That’s why Teal made a formal request on Dec. 11 for the county to pursue enacting its own tax in the cities. Teal also suggested the potential revenue to be used for funding the conference center.
On Wednesday, when the issue was discussed again, Teal said that “the hurdle is at the state.”
“If the state approves it, then we’re good to go,” Teal said.
Member Joey Hobbs asked Teal what the potential revenues would be if the county adopts the hotel tax, if the state approves.
“There is about $13 million in the county – that’s gross hotel revenue, $10 to $11 million (of that) in Manchester gross hotel revenue,” Teal said, reiterating the majority of the gross revenue comes from Manchester.
Though during earlier talks Teal suggested a tax rate for the county of 3 percent, he offered a higher number on Wednesday.
“I would suggest you request 4 percent,” Teal said.
A rate of 4 percent occupancy tax for the county, in addition to the current 5 percent collected by Tullahoma City and 6 percent collected by Manchester City, will bring the total tax rate for hotels in Tullahoma to 9 percent and in Manchester to 10 percent. Those rates would put the two cities among the highest occupancy tax rates in the state.
At the current rate of hotel room sales, the new tax could potentially generate about half a million dollars.
A rate of 4 percent of county hotel tax and a total of $13 million from hotel room sales would generate $520,000 in revenue from the occupancy tax.
The committee members voted to pursue adopting the tax; however, they did not agree to use the potential revenues for funding the conference center.
The first step to levying the county tax in the city limits, though, is amending the state law.
According to Public Information Officer for the Tennessee Comptroller of the Treasury John Dunn, the county cannot add a hotel-motel tax in city limits if the city occupancy tax is already in effect unless at least one of a long list of very specific exceptions is met.
State law (TCA 67-4-1425) outlines limitations and the exceptions to levying hotel tax, stating “a county shall only levy such on occupancy of hotels located within its boundaries but outside the boundaries of any municipality that has levied a tax on such occupancy prior to the adoption of such tax by the county.”
The law outlines exceptions; however, Coffee County doesn’t seem to fit in any of the excluded categories.
“If the county is authorized to levy a tax based on an exception to the statute, it does not appear that the cities would have to approve it,” Dunn said.
Elena Cawley may be reached via email at firstname.lastname@example.org.