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Here’s how North Myrtle Beach, Surfside Beach chose to proceed in hospitality tax saga

Here are the basics on the Horry County, Myrtle Beach lawsuit

Myrtle Beach and other cities are fighting with Horry County over hospitality tax. Myrtle Beach filed a lawsuit over the fee saying it was illegally collected.
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Myrtle Beach and other cities are fighting with Horry County over hospitality tax. Myrtle Beach filed a lawsuit over the fee saying it was illegally collected.

North Myrtle Beach and Surfside Beach both voted on Tuesday to put any new revenues generated from local accommodations and hospitality taxes into an escrow account until a lawsuit between Horry County and Myrtle Beach is resolved.

Last week, Judge William Seals Jr. issued an order refusing to reverse his decision barring Horry County from collecting any hospitality tax from county municipalities, but ruled that Myrtle Beach, North Myrtle Beach and Surfside Beach must take all new hospitality taxes they collect and place them aside while an appeal from Horry County over the fees is decided.

Additionally, Seals ruled that Myrtle Beach and Horry County must enter mediation.

“This sets aside funds that Horry County normally would have collected prior to the judge’s injunction,” North Myrtle Beach spokesperson Pat Dowling said. “This is simply because if the injunction is appealed in a higher court, and should the county prevail in its appeal, the money would be there with hopes to give Horry County.”

Surfside Town Administrator Dennis Pieper added that the municipalities are in good shape, explaining how they’ve prevailed following the county’s attempts to control the collection of the tax.

Hypothetically, the municipalities will not have to keep their funds in trust for long. Mediation between Horry County and Myrtle Beach is set to begin next week, which could bring a relatively swift end to the ordeal that began months ago.

How we got here

Horry County’s collection of 1.5 percent of the hospitality tax stemmed from a 1996 program to help short- and long-term transportation needs. As part of the program, the tax called a hospitality fee would apply to Horry County municipalities. The money funded a road-improvement program throughout the county.

With the program originally set to expire in 2017, it was extended in perpetuity by County Council that same year without Myrtle Beach’s consent. In 2018, county officials voted to dedicate the hospitality funds toward public safety and building I-73.

Council’s decision resulted in Myrtle Beach, North Myrtle Beach and Surfside Beach all passing ordinances earlier this year allowing them to collect the tax and barring the county from collecting any hospitality taxes the municipalities collect within their borders starting July 1.

In March, Myrtle Beach, on behalf of itself and the other municipalities, 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 claimed the county needed consent from municipal leaders to continue to collect the tax within city limits after the program expired. Myrtle Beach asked the judge to prevent the county from collecting the tax as the lawsuit was heard.

While county officials argued Myrtle Beach was out to destroy any plans to construct I-73, municipal leaders in a May news conference said the purpose of the lawsuit was about home rule and protecting taxpayers, not an attempt to kill I-73.

Since then, both Horry County and Myrtle Beach have continued to file motions and injunctions to take control of the tax, with every county municipality supporting Myrtle Beach as plaintiffs.

What’s next?

Now four months since the initial suit was filed, Myrtle Beach and Horry County are expected to enter into mediation on Aug. 1. This is a required measure before the lawsuit can go to trial.

Karl A. Folkens, of Florence, was appointed as the mediator. According to his website, he has been a mediator for over 4,000 cases.

If no agreement is met during mediation, the case will not move forward until after Horry County is done appealing a previous decision from Seals Jr.

Through a series of orders, Seals placed an injunction against Horry County which allows municipalities to collect the tax until the lawsuit is resolved. He also ruled that the municipalities must keep the funds in a trust during this time.

Horry County took issue with this ruling and is currently appealing the decision calling it a “drastic” measure. The county’s legal team for the appeal claims it violates the status quo and causes undue burden.

“The effects of the injunction are repugnant to justice,” Horry County argued. “The injunction completely destroys the status quo ante that has existed between the parties for more than twenty-two years and imposes a new, judicially created status quo.”

Myrtle Beach has yet to respond to the appeal but must do so by Monday.

No date has been set for when Myrtle Beach and Horry County will go in front of the appeals court.

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