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'Tourism' taxes return from the dead thanks to Mississippi Legislature

While old soldiers might not die, but fade away, local tourism taxes authorized by the Legislature never do either. They just keep coming back.

Southaven is located south of Memphis and boasts the highest paid mayor in the state, Darren Musselwhite, who makes $150,000 per year. The city has also been collecting revenue from a 1 percent restaurant tax, known as the "Penny for Parks" since 2012 that was authorized by a bill passed by the Legislature that called for a city-wide referendum on the tax, which was later approved by voters.

The tax brought in $1.866 million in fiscal 2017 and $1.820 million in fiscal 2016, according to the state Department of Revenue. The tax expired on July 1, 2017 and the DOR sent a notice to taxpayers that said they could either remit the tax to the DOR or return it to customers.

Southaven businesses continued to collect it, however. The DOR has collected more than $416,000 since the tax expired. Now the city will receive that money even though it was collected needlessly, thanks to House Bill 1471 that was signed into law this session by Gov. Phil Bryant.

The new law, authored by state Reps. Jeff Hale (R-Nesbit) and Bill Kinkaide (R-Byhalia), approves retroactively the collection of the tax from July 1, 2017 even though the authorizing law had expired. The city will began collecting the tax legally on May 1.

The same legislators also authored HB 1472 that did the same thing for Horn Lake and its hotel tax. The north Mississippi city's two dollar per room hotel tax, also authorized by a city-wide referendum, expired in July 2017. Like the Southaven tax, Horn Lake will begin collecting the tax on May 1. The tax generated more than $318,000 in revenue in fiscal 2017 and more than $278,000 in fiscal 2016.

Kathy Waterbury, the associate commissioner of the Mississippi Department of Revenue, told Mississippi Matters that businesses are encouraged to stop collecting a tax once the authorizing law expires. She said that they have the choice between returning it to individual taxpayers or simply remitting it to the Department of Revenue, where it is distributed to the general fund.

This session isn't the only time the Legislature has approved retroactively the collection of an expired tax.

Last year, the Legislature passed and Bryant signed into law Senate Bill 2941, which reauthorized the city of Byhalia in north Mississippi to collect its 2 percent hotel tax. The tax actually expired in July 2016, but the city continued to collect it for a year before SB 2941 allowed it to retroactively keep the proceeds.

Local and private bills

The 83 special local levies on restaurants and hotels — the tourism taxes — began life as local and private bills in the Legislature. Local and private bills usually benefit a city or county in a legislator's district and are one of the last chores the Legislature wraps up before leaving town at session's end.

Other bills that part of the local and private category passed this year include several that authorized the use of golf carts on city streets in Mendenhall, Ocean Springs and Clinton, others that authorize local governments to make contributions to non-profit organizations and another that authorizes the establishment of a Scenic Rivers Alliance.

New tourism taxes authorized by local and private bills that passed this session include:

  • A 3 percent tourism tax on hotels in Richland to fund tourism and parks.

  • An addition to the existing tourism tax in Grenada of 1 percent on hotels and restaurants to fund construction, operation and maintenance of a sports park.

  • An additional 1 percent tax on hotels to fund park and tourism improvements in Clinton.

  • Moss Point will levy a 2 percent tax on restaurants to fund parks and tourism improvements.

  • Pearl will be able to charge a 3 percent tax on hotels and a 1 percent tax on restaurants to fund tourism and park improvements.

  • Vaiden will add a restaurant tax.

  • Hattiesburg will levy additional taxes on hotels and restaurants, with some of it going to fund tourism and parks improvements while other proceeds will go to the University of Southern Mississippi to fund athletic facility improvements.

All of the new taxes will require a referendum of local voters before they can go into effect and usually have an expiration date of three years from passage.

The same rules that govern the passage of general and appropriation bills apply to the local and privates. A three-fifths majority of both chambers are required to pass a new tax, which are pitched as temporary taxes when pitched in a referendum and are often re-authorized when they expire after three years without input from local voters.

The local and private committees in each chamber of the Legislature are the only committees authorized by the Mississippi Constitution, with the rest mandated by legislative rules and state law.

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