Tax-Evaders Beware: Flagler Will Take Over Local Collection From Short-Term Renters, Projecting Jump in Revenue

The party’s ending for property owners in Flagler County who rent their homes to short-term vacation renters and who don’t pay the tax on that revenue: The Flagler County Commission on Monday unanimously approved shifting tax collection of the 5 percent tourist tax from the Department of Revenue in Tallahassee to the tax collector’s office in Bunnell.

County officials estimate that tax collection could increase by 20 percent, adding up to $500,000 to the tourist-tax coffers. Current tourist-tax revenue is around $2 million a year. The tax is paid exclusively by short-term renters, people who book hotel and motel rooms, RV parks and any rental arrangement that lasts less than six months, so it is overwhelmingly paid by non-residents. But officials estimate that hundreds of property owners who collect the tax are not remitting it—intentionally or unknowingly evading the law.

Starting in July, Tax Collector Suzanne Johnston will be responsible for collecting the tax, making Flagler the 44^th county out of 67 in Florida to do its own tourist-tax collections.

“It really does look like there’s additional money sitting out there,” Johnston said during a workshop on the proposal. The property appraiser’s numbers show that there are 18,000 properties in the county that are not homesteaded, and that therefore are likely used as rentals (assuming they’re not vacant: many properties are.) “That is a big number to be working with, so I view it as a massive project.”

A disproportionate number of non-homesteaded properties are on the barrier island, where a disproportionate number of short-term rentals are.

“If this is something that y’all want us to do, we’re more than happy to jump on this, collect more money,” Johnston said, “but the way we view it is that taxes are only fair if everybody pays their fair share, and so it has to be that you dig, you work, you find them all in order to make it fair for those that are paying. It’s not voluntary.”

Neither Johnston nor County Administrator Craig Coffey said specifically whether the new “massive project” will require hiring additional employees in Johnston’s office. Coffey said that because the county is ending ambulance billing and starting local tourist-tax collection, it’ll be like “we’re going to turn one spigot off and turn one on.” But the task both described was not a small one, and entails collecting all local tourist taxes, not just those not currently paid. The tax office is allowed to retain 3 percent of tax collections, by law. But 3 percent even on $2.5 million yields just $75,000, which would barely account for one and a half additional employees.

Still, local collection presents clear advantages to county officials—and to county residents, who depend on the local tourist-tax revenue to market the county, improve the county’s tourism infrastructure and cultural venues, and restore and maintain the beaches, a huge task currently partly paid for with tourist-tax revenue.

Matt Dunn, the county’s tourism director, said the two main reasons to go the local route with collection are to increase revenue and to profit from the research data that would be collected along the way regarding short-term rentals for marketing purposes. Personal information will be maintained by Johnston. How legal, or ethical, it is for a county agency to use the data for marketing purposes is unclear.

Coffey said either computer software or even scans of 10 or so websites that advertise short-term rentals in Flagler will show a big disparity between actual tax revenue and what ought to be local revenue: “Typically if you mesh up the number that are registered with the state, I think that number is probably under 300,” Coffey said, referring to the number of short-term rental units in the county. “And the actual rentals we have, which we believe is closer to 1,000, there’s a big discrepancy in the numbers that are reporting to the state versus the numbers that probably should be reporting.”

The Department of Revenue sent Johnston a listing of 206 unique filers for tourist taxes in 222 Flagler locations. What that shows is that Airbnb, the company whose participants rent rooms in their owner-occupied homes—rentals that still must pay the tourist tax–may have a dozen or a thousand such locations, but Airbnb counts them all as one: they’re not required to turn in a complete list of individual rentals. Therefore they don’t submit an auditable, itemized list of rentals. That presents a particular problem for collections.

“Most of it is going to be: I didn’t know I was supposed to do that. So it’s a matter of educating them,”  Johnston said. “If they collect the money and spend it, they will go to jail. That is in the law. You don’t do that.” The law provides for some teeth in collection enforcement, such as garnishing bank accounts, as is the case in Manatee County. Johnston said that one county’s cursory examination of rentals that went without paying added up to  5,000 units, suggesting the problem is widespread.

It’s not clear how tongue-in-cheek Commissioner Don O’Brien was being when he said: “I know the citizens of Flagler County, you’re just going to hear that they didn’t know, no one is cheating us, it’s just one of those things. The 5,000 people they found in other counties, that’s their issue, but I know in our county it’s just more education and learning.”

 “Well, you catch more flies with sugar than you do with vinegar,” Johnston said.

“It’s unanimous, we support this,” Commission Chairman Greg Hansen said. The administration will craft an ordinance that will be approved at two subsequent public hearings. Commissioners will then get a monthly report of tax collections to measure the outcome of the initiative.