Judge rules in favor of Myrtle Beach receiving hospitality tax
Horry County extended the deadline to collect a hospitality tax without the City of Myrtle Beach’s approval and now a judge has ruled the county won’t be able to collect the fee in most municipalities as a lawsuit is pending.
On Friday, Judge William Seals granted a Myrtle Beach request to stop the county from collecting a 1.5 percent hospitality tax. The decision does not prevent the county from collecting the tax in unincorporated parts of the county. The money collected can be used for various road projects, including I-73.
Earlier this year, Myrtle Beach sued Horry County over the hospitality tax, a uniform tax imposed on sectors of the hospitality industry, including prepared meals, food and beverages sold in or by establishments.
As part of the suit, the city asked the judge to prevent the county from collecting the tax as the lawsuit is heard.
Myrtle Beach said in its lawsuit the 1.5 percent hospitality tax the county collected stemmed from a 1996 program to help short- and long-term transportation needs. As part of the program, a tax would apply to Horry County municipalities called a hospitality fee. The money funded a road-improvement program through the county.
With the program expiring in 2017, the city claimed the county extended the tax without city approval and voted to direct funding to I-73 without Myrtle Beach’s consent. Myrtle Beach asked a judge to declare the Horry County ordinance that extended the tax deadline invalid and to prevent the county from collecting the hospitality fee.
According to the judge’s order, the county “unilaterally attempted to extend the hospitality fee for five years and then, just months later, attempted to remove the Sunset Provision altogether.”
“The County knew municipal consent was required as it previously obtained municipal consent, but it nevertheless acted unilaterally to preserve a revenue source,” the order states.
Seals also ruled that granting the city’s request was the only way to protect Myrtle Beach residents as the lawsuit is argued.
At one point the county argued city residents could challenge the fee through the Board of Fee Appeals. But Seals determined the county has no authority to appoint a Board of Fee Appeals, explaining the process to file through the board is “unrealistic” and “burdensome.” He added its likely prohibitive for tourists to go before the board.
However, Seals’ decision does not end the case as the both sides will continue to debate the merits of the lawsuit.
In previous court documents, Horry County denied many of the city’s allegations, implying Myrtle Beach mismanaged its budget for years and wanted to regain control of the tax to obtain more money for its own use. The county also levied several allegations against the city, its money management and past practices.
The city responded arguing the county deprived residents and tourists of their voice by acting in an “oppressive manner towards the fee-paying residents and visitors” by illegally imposing the hospitality tax within municipal limits.
The city claimed if the hospitality tax remained in effect during litigation, residents would inevitably pay a cumulative 6 percent on accommodations and 4.5 percent on prepared food and beverages, in addition to the state sales tax and other fees or taxes.
The tax has become a controversial issue at government meetings throughout Horry County in recent months with Myrtle Beach, North Myrtle Beach and Surfside Beach voting on ordinances that take control of the tax from Horry County starting July 1.
The county stands to lose roughly $20 million in hospitality taxes due to the municipalities’ decisions, which puts a black cloud over funding for I-73.
County officials made a deal last summer with the S.C. Department of Transportation where it agreed to pay installments from the hospitality tax to complete its portion of the billion-dollar interstate project over the next 20 years.
With the fate of I-73 in question, Myrtle Beach officials reached out to county officials and neighboring municipalities in March about entering into confidential intergovernmental negotiations to fund the project. However, the county has denied the request, stating any negotiations regarding taxpayer money should be discussed in public.
With Horry County Council concerned over the future of I-73 with funds in question as the city and county remain at odds, county officials during their Tuesday meeting decided not to squash the I-73 deal altogether. Instead, they will request DOT give them until October to agree on a plan.
County officials were originally supposed to approve a plan before the end of the month.
“The City of Myrtle Beach is pleased by the judge’s ruling today in the Hospitality Fee case and will proceed accordingly,” City of Myrtle Beach Public Information Director Mark Kruea said. “ The court recognized the merits of the city’s argument. Our financial staff will make a recommendation about a date for implementation, so that answer is not available at this time.”
— Staff reporter Alex Lang contributed to this report.
This story was originally published June 21, 2019 at 4:39 PM.
