Taxes in Paradise

Perhaps you already know that Lee County levies a 5% tax on rentals that are less that 6 months long.

That pretty much includes all tourist accommodations.

The 5% room tax is in addition to the State of Florida's 6% sales tax.

Therefore, any rental on Sanibel - Captiva should include an 11% surcharge on your rental.

That's a sizable up-charge, and no one likes to pay taxes anyway.

The 6% State tax goes to pay for state government and infrastructure.

The 5% County tax goes to pay for promotion of the County as a tourism destination, for beach and shoreline renewal and tourism related facilities such as construction of the Twins Spring Training stadium.

Now, you may or may not agree with the tax, the uses of it or the size of it. I personally think when it went from 3% to 5% that there was an unintended consequence lurking in there somewhere.

Clearly, all of the purposes to which the tax revenue is applied are legitimate in one way or another.

Promotion of the destination supports the tourism infrastructure by informing potential visitors about Lee County attractions (read Sanibel-Captiva as a large part thereof). The resulting business supports hotels, motels, attractions, restaurants, stores and vacation rental companies. Absent the business, these assets would wither. Coming here would be a lot less pleasant.

Similarly, tax revenue that restores the beaches and enhances the shoreline makes this a nicer place to live as well as to visit. And with crummy beaches, who would want to come here?

Even the Spring Training facility pumps millions of dollars into the economy. It now is also used to host national sports competitions, attracting players and families who bring their money, leave it and go home.

Let's get to the unintended consequence. As the total dollar amount of an 11% tax began to push the upper limits of acceptability, ie. how much extra are you willing to pay for a room somewhere, an incipient revolt is materializing.

It takes two forms. One is nothing new. Some private owners of condos or houses, who rent them directly to visitors, fail to collect taxes and/or collect them and fail to forward them in full to the county. I'm not an attorney, but it seems to me the former is misdemeanor stuff, while the latter may felonious.

Anyway, as a tempting as it may be to a visitor to cut a deal by not paying taxes, consider that once someone steps over the line in one part of his or her operation, when and where is the next step over the line? Health department inspections? Pest control?

I have a pretty good idea why any owner would do this, since he or she is not paying the tax out of his or her personal bank account. I think they believe if they can offer a cheap (tax-free) price, they will rent more weeks in their unit(s). Doesn't that put the people who are following the rules at a disadvantage to those who sidestep them? How fair is that? How constructive to the destination and industry, the same destination and industry the visitor relies on?

As for the newer revolt, a real estate company has proposed "unbundling" rents. That is, if an owner has baked certain costs such as association fees, cleaning costs, trash disposal, swimming pool maintenance, etc.
into the rent for the unit, that is the amount on which the tax is based. But what if those items are "unbundled" from the rent and charged separately, as fees? Theoretically, they would not be subject to the room tax under current law. The renter would receive two bills: one for taxable room rent, the other for untaxed "services." The real estate company claims to have a memo approval of the idea from the State Department of Revenue.

If this ruling goes through, I suspect room tax revenue will be reduced by at least as much, maybe more, than the additional 2 percentage points that it was increased last year.

Am I wrong?