Hotel room tax will increase from 10 percent to 12.5 percent, the tax on time share estates will increase from 8 percent to 10.5 percent, and more excise tax revenue will go to the V.I. Waste Management Authority, if legislation approved in committee Tuesday becomes law.
One bill by Sen. Neville James at the request of Gov. Kenneth Mapp, increases the tax and allocates some of the revenue for agriculture, sports tourism promotion and interscholastic sports.
“Based on our analysis, increasing the Hotel Room Tax from 10 percent to 12.5 percent, which represents a 25 percent increase, will generate an additional $5.8 million in Hotel Tax Revenues,” Internal Revenue Bureau Director Marvin Pickering told the Finance Committee. “For the current fiscal year through July 2015, the hotel revenues has been $21.2 million. This is an 11 percent increase from FY14 in which only $19.1 million was collected," he said.
Tourism Commissioner Beverly Nicholson-Doty said she believed the increase was reasonable. “The increase is not especially onerous and, in many cases, it is less than the current hotel and resort fees already imposed on the traveler,” she said.
Sen. Neville James asked when the Hotel Room Tax was last raised.
Nicholson-Doty said, “The Hotel Room Tax went from 8 percent to 10 percent in 2010 and became effective in 2011.”
James asked if that increase hurt tourism. "There was no backlash, per se?" James asked.
Nicholson-Doty said, "No sir. But I wouldn’t recommend raising it much beyond that."
Sen. Tregenza Roach asked how the V.I. tax compares to other tourist destinations.
Nicholson-Doty said, “Even with the increase, the USVI will not be at the highest end of the room tax spectrum and our destination does not have the departure taxes that many independent nations and territories in the region levy."
Similar taxes in the region range from 5 percent to 20 percent, and are mostly between 10 percent and 12 percent, she said.
The committee voted to send the measure on to the Rules and Judiciary Committee for further debate.
The committee also voted to hold a different bill that would have just increased the hotel occupancy tax, without any of the other provisions of the bill the committee approved. Sen. Clifford Graham explained the bill that was held in committee was submitted by Mapp with the budget bills several months ago, and was not needed because the increase was part of Bill 31-0222.
More of the territory’s excise tax revenue will go to the VIWMA to help pay for sewage treatment and trash disposal if a bill approved in committee Tuesday is enacted into law. The bill, also sponsored by James at the request of the governor, mostly keeps excise taxes unchanged, but increases the proportion of those revenues that go to VIWMA.
It increases over several years VIWMA’s portion of excise tax on beer from 48 cents per case to 98 cents per case and on carbonated soda from 36 cents to 72 cents per case. It increases the portion from all other goods from 1 percent of cost to 2 percent of cost.
"Just to be clear this is not a revenue generating measure for the General Fund; it is a revenue generating measure for the Waste Management Authority," Pickering testified. He later clarified that the tax on carbonated soda would increase, because the current tax is less than the proposed increase in payment to VIWMA.
VIWMA Executive Director May Adams Cornwall recounted the history of the VIWMA and its funding, saying excise revenues have been going to the authority by default, because legislation eliminating the funding source required new VIWMA fees to be in place first.
When the Legislature rejected those fees, the funding reverted to its original status, but the law was unclear. Cornwall said the bill also clarifies and codifies that funding source.
The committee also sent forward an array of budget bills and appropriation transfers that codify the governor’s budgets for executive agencies and semi-autonomous entities like the University of the Virgin Islands as they were discussed during budget hearings this summer. They will all be considered next in the Rules and Judiciary Committee, before final votes in legislative session planned for Sept. 22-23.
