Taxing

Story: Corey Engelsdorfer
Prince Edward County moving forward with Municipal Accommodation Tax

At a special Committee of the Whole meeting last Wednesday, council was presented with a special report on the implementation of a Municipal Accommodation Tax (MAT). The 4 per cent tax will be charged on all roofed accommodation stays of less than 30 days, and, to the dismay of many accommodation providers, will be implemented rather quickly, by June 1, 2020.

The MAT was introduced by the provincial government on December 1, 2017 as an initiative imposed on the cost of a transient accommodation lasting less than 30 days. It is meant to garner new revenue levied on visitors, not local residents. In 2018, staff ran some figures for a proposed 4 per cent transient tax. At that time, it was estimated that the net for the municipality would have been $836,000, which they believe is a conservative figure. Ontario legislation states 50 per cent of the funds are to be used by the municipality for spending on infrastructure or services that support tourism, such as road repairs. The remaining 50 per cent is to be used for destination promotion and development. Close to 30 other Ontario municipalities currently charge a MAT.

Todd Davis, Acting Director of Community Development and Strategic Initiatives, presented his findings to council, and said staff had been looking into the tax for roughly three years. “We identified that a large proportion of overnight accommodations or short-term accommodation in Prince Edward County are housed in whole home or partial home STAs. In order to understand what that marketplace looked like, we started this process in late 2017. In 2018 and 2019 we went through developing a regulatory and licensing system that we launched in November of 2019,” says Davis.

There is currently a destination marketing fee that exists in Prince Edward County. It is industry-led and voluntary, and collected by STAYPEC, an organization that has 10 members, who each charge a 2 per cent fee. Once the MAT is passed, this fee would collapse, but as a current collector, STAYPEC is an eligible tourism marketing entity that could benefit from up to 50 per cent of the revenue.

SOME FACTS
MAT collection is done at the time accommodation is purchased, and must be labelled as MAT on the invoice. Remittance is 30 days after the proposed period, based on a quarterly remittance schedule with the first quarter ending March 31. Any business that doesn’t meet the filing deadline could be charged a 1.25 per cent per month penalty. An accommodation provider could make a collection agreement with their online booking platforms, but the only one that collects currently is Airbnb. Business licence renewal can also be contingent on collecting fees. Employee housing, tents and trailer parks will fall outside of the tax. Group bookings are exempt as are any booking made prior to and paid in full before the implementation of the tax. “June 1 is the effective date knowing in advance that for most summer accommodations in the County in high season, those accommodations would be booked and paid for prior to June 1 date. There would be a much more limited amount of money collected in this calendar year, but it sets us up nicely to have a full MAT season in 2021,” said Davis. The County will hire a staff member to administer the program at a salary of $120,000.

WHY JUNE 1?
Many members of the audience and accommodation providers commented that the June 1 implementation date was not only unrealistic, but that it was a burden to a small business. June falls right at the start of the busy season, and for many, managing another tax could prove to be a struggle. Davis noted that June 1 was chosen to make sure it doesn’t impact following tax seasons.

“We suggested June 1 because that represents the fastest possible timeline that we can bring the resources to administer this tax, knowing full well that we won’t collect a full version of the MAT in 2020, but it would allow us the season to sort out the challenges and issues to collect a full tax in 2021,” said Davis. “The later we push the implementation back, will have greater impacts in following tax seasons.” Many deputants had suggested pushing the start back to January of 2021, but Davis said “To push this back to January 2021 would mean any booking made before that date would not be subject to the tax, meaning we wouldn’t see any benefit from the tax until 2022.” Davis told council this would also allow for public consultations to take place throughout the summer months.

AUDIENCE COMMENTS
Richard Barrett, and Jason Sharpe, Chair and Past-Chair of STAYPEC—which represents 715 beds and 312 full and part-time employees throughout the County—provided a deputation to council. Their organization is a supporter of the MAT, but not of the proposed timeline. “We support this MAT, and commend staff for setting the rate at 4 per cent,” said Barrett. He told council that their goal is simple, wanting to put heads in beds in the County in the shoulder and winter season, but said the timeline just simply doesn’t work. “We certainly can appreciate the desire to implement the tax as soon as possible, but we feel the June 1 implementation date is just too early. June 1 is exactly one month before high season. Many have already taken bookings and accepted deposits that will have arrival dates after June 1. To go back to these guest and collect an additional 4 per cent is not an option,” said Barrett, who suggested a January 1, 2021 launch date.

Sarah Doiron, Manager of the Picton Business Improvement Association (BIA), spoke to the 50 per cent of MAT that is to go to destination promotion and development. “Picton was established as a BIA by the municipality in 1991 and today it remains the only official BIA in the County as defined by the Municipal Act. The Picton BIA Board of Management is interested in being included as one of the eligible tourism entities to receive a small percentage of the MAT.” Doiron noted that Huntsville recently introduced a MAT and their BIA receives a portion of the funds to help bring tourists in the off-season. “Currently all of our funding comes from a levy on commercial property taxes. The BIA board of management sees the MAT as an opportunity to increase revenue, to enhance the experience of visitors to Picton and the County by using the funds of the visitors and not of the taxpayer or commercial property owner,” said Doiron. Councillor Phil St. Jean then questioned what other organizations are out there that might come to the table to ask to be part of the revenue stream.

Rick Conroy, proprietor of Newsroom Suites in Wellington, told council he could get on board with a MAT, but that the process has left much to be desired. “The communication and rollout of this new tax regime have been poor. During budget deliberations, you heard your new CAO, Marcia Wallace, say no fewer than a dozen times over four days, that big changes were coming, but that stakeholders would be consulted,” said Conroy. “But on the very first big change out of the gate, there has scarcely been any consultation with the folks who will be directly affected.” Conroy shared that he had received many phone calls and emails from owners who weren’t aware a MAT was even being discussed. Councillor Janice Maynard told the Horseshoe that she felt they didn’t even need to notify that they would be collecting the tax. “If the province was going to bump the sales tax up a percentage point, it would just happen,” said Maynard.

One of those phone calls was from Judy Plomer. She runs a cottage rental property in South Marysburgh, and told council this news was a shock. “This came as a complete surprise to me. I thought how on earth am I going to handle this. How am I going to go back to my customers and ask for more money,” said Plomer.

Ryan Kruetzweiser of Lake on the Mountain Resort told council he felt that the MAT is a discriminatory tax and that Shire Hall needs to better spend the money they already have. “I don’t think every single operator out there is on board with a MAT. We are in fact not. First and foremost we find it a discriminatory tax. You are picking on a lot of small, family operated businesses,” said Kruetzweiser. “I would encourage council to be more efficient in the revenue they already have.”

After a short discussion, council passed the motion unanimously to approve the implementation of a Municipal Accommodation Tax for all short-term accommodations at a rate of 4 per cent by June 1. Staff will also focus on public and industry consultation to help determine how the funds will be spent and allocated by the Fall of 2020. The motion will be ratified at the March 24 council meeting.