I-73 funding depends on local municipalities working through tax allocations
Local taxpayers could face confusion and “mayhem” if Myrtle Beach is allowed to collect new hospitality taxes, Horry County officials argue in court filings.
The county asked a judge this week for an order to prevent the city from collecting the taxes that were set to start July 1.
In March, Myrtle Beach enacted two new taxes, according to court records. One was a 3 percent tax on lodging while the other is a 2 percent hospitality tax.
That is in addition to, the county contends, a 1.5 percent county hospitality tax. The county says state code caps hospitality taxes at 3 percent. The county charges a 2.5 percent hospitality fee for entities in county limits. Businesses inside a municipalities’ limits face only a 1.5 percent hospitality tax.
The county tax was approved more than 20 years ago with funds designed to go towards road projects. However, after the county extended the time period to collect the tax and directed money to the creation of Interstate 73, the tax became a public and legal dispute.
Myrtle Beach sued the county over the tax and asked a judge to issue an injunction to prevent Horry County from collecting the fees.
Horry County responded to that request by asking the judge to stop the city tax.
“If the City is allowed to start collecting its brand new taxes on July 1, the City will have deliberately created a situation in which taxpayers are paying more than the maximum amount that can be charged by local governments for local accommodations and hospitality taxes,” Horry County argued in court filings.
The confusion could lead to more lawsuits from businesses charging taxes to the consumers, Horry County contends.
As a result, the county asks the judge to stop Myrtle Beach from collecting the new taxes.
“No amount of money will be able to compensate the County for that mayhem (or the taxpayers who are also affected),” the county argues in its filing.
City spokesperson Mark Kruea declined to comment on pending litigation. He sent a “fact sheet” to local media Wednesday afternoon. In the attached document, the city states “… Horry County Council’s actions that are the subject of the lawsuit are also unconstitutional, in that they violate Home Rule and the sovereignty of municipalities recognized by the Constitution and state law that delineates authority between Counties and municipalities within their jurisdictions.”
On Thursday, Horry County spokesperson Kelly Moore copied Kruea in an email she sent out to media.
“While the County disputes the allegations made by the City of Myrtle Beach, it is addressing these matters with the Court, e.g. by way of recently filed Answer, Motion, and Memorandum of Law.”
Horry County argues in its filing that Myrtle Beach did not object to the tax from its creation to when it was first extended in 2004. It was again extended, by county ordinance, in 2016 and 2017.
The city maintains that it never agreed to the extension, but county officials say it didn’t need the city’s approval. Horry County says the city misinterpreted the laws and that state code allows some taxes to be imposed without the consent of a municipality.
Myrtle Beach argued it had no choice but to ask a judge to stop the county tax. But, Horry officials say anyone who pays the tax can challenge it before the Board of Fee Appeals.
The county also contended it would be greatly impacted if the city wins its request to stop the county fee. Under South Carolina rules, an entity that requests an injunction has to pay a bond — one that would cover the potential loss the other side might face. The bond is in the case the county loses the injunction — and therefore the ability to collect money — but still wins the overall case.
Horry County stated it collects $50 million a year in hospitality tax. The case is likely to take years to resolve and the bond would need to total hundreds of millions of dollars, the county filing reads. Without the bond, the county would have no way to recoup years of lost taxes, according to the filing.
“The mayhem is presumably impossible to undo,” the county states. “Once businesses have overpaid these taxes, neither the County nor these businesses will have a way to return that money to the customer, as even if a business kept records of each transaction that used a debit or credit card, cash transactions would presumably be untraceable at this stage.”
State representatives threw their support behind the county last week when it filed a bill in the House of Representatives asking the state to make Horry County the agency to collect the 1.5 percent fee on all hospitality services.
Horry County’s delegation members who signed include: Reps. Carl L. Anderson, Lucas Atkinson, William H. Bailey, Alan D. Clemmons, Heather Ammons Crawford, Russell W. Fry, Kevin Hardee, Jackie E. Hayes, Jeffrey E. Johnson and Timothy “Tim” A. McGinnis.
North Myrtle Beach spokesperson Pat Dowling sent an email Thursday on Mayor Marilyn Hatley’s behalf announcing a Monday news conference in which the Horry County League of Cities will address House bill 4597, which Dowling said “seeks to circumvent Home Rule by blocking the League’s member cities and town from rightfully and legally collecting hospitality fees generated within their own jurisdictions and prevent them from determining how to spend those funds based on the needs of their own communities.”
The mayors of the towns and cities have been asked to speak at the news conference that will be held at 10:30 a.m. at Conway City Hall, 229 Main St.