Clarity and transparency

Resort Tax begins overhaul of taxability ordinance
"The devil is most certainly in the details,” -Kim Beatty, attorney with BKBH and legal representation for Resort Tax said.

Alcohol and tobacco tax – known as sin tax – has been bouncing in and out of Big Sky Resort Area District Tax Board (Resort Tax) meetings as a long and tedious dance – the taxable definition amended in the taxability ordinance one year and then altered again a few years later. Board Treasurer Sarah Blechta has been sifting through old board minutes trying to glean some understanding of the reasoning behind the moves.

The current board is having full board discussion partly for complete transparency, which is something Blechta said she has found lacking in her digging. She believes some of the past discussions for amending the alcohol and tobacco section of the ordinance for the 3% resort tax were done in subcommittee, which means little to no explanation was provided for constituents and subsequent board members.

“By what I can gather from the minutes, it was done in subcommittee. The majority of the conversation happened in the subcommittee and then the subcommittee came forward with what they thought was appropriate, but I’m still unclear on the intent. I like having [the discussion] in a large group because you can really have a clear understanding of everybody’s intent,” she said.

Section 9, of Ordinance No. 98-01 – the taxability ordinance – has 13 sub sections, which further define taxable luxuries. Sub section 8 pertains to alcohol: “All alcoholic beverages including, but not limited to, beer, wine, liquor or other alcoholic beverages sold in an open container or by the drink.”

The board has been considering expanding the ordinance to include tax on the sale of all alcohol and tobacco sold in the district.

Renee Schumacher, owner of the Conoco, wrote a letter of disapproval to the Resort Tax board that was read at the July 18 meeting.

“Please consider the workers,” she wrote before noting that Big Sky is a difficult place to live and there are layers of Federal tax already in place.


What is the role of resort tax?

While delving into the alcohol and tobacco tax issue, the board engaged in debate over the ordinance itself and the board’s role in the community. Consensus was not coming easily, so Board President Kevin Germain said that they – in essence – have gone back to the drawing board. Larger questions were asked: What to tax, who to tax, enforceability of the tax, etc. The board is currently engaged in a major overhaul of the ordinance in addition to seeking a clearer definition of its purpose in the community.


Blechta was one of the board members who asked that the board and legal counsel clarify the ordinance and what it is. “Maybe it is some type of mixture of tourist and luxury. It’s not just a tourist tax. If it is a tourist tax, you’re about to get a whole lot of arguments,” she said, noting she has been hearing from individuals in the community questioning the definition of resort tax itself.


Vice Chair Steve Johnson said those people are talking without an appreciation of what state law is.

“It is not a luxury tax and it is not a tourist tax. It is framed by state law and supported by local ordinance,” Johnson said and explained that there is a need to “dispel accumulated folklore” around this issue.


All the muddied lingo

A discussion occurred around the ambiguous definition of the tax in state statute and the further muddied area of defining a luxury.

Board Director Mike Scholz noted that it seems odd that the section that defines luxury items includes “luxury” as a part of the definition and called the entire definition “ambiguous.”

Section 1-4: “Luxuries” means any gift item, luxury item, or other item normally sold to the public or to transient visitors or tourists.

“Any item [sold to the public] makes it a general sales tax,” Scholz said. “It looks a lot like a general sales tax.”

Kim Beatty, attorney with BKBH and legal representation for Resort Tax said the legislature drafted the definition of luxury and that it cannot be easily changed. 

Resort tax in other communities is done with a long list of exemptions or by tightening up your definition, Scholz replied.

The qualifying sentence after is that any item that is necessary for life is excluded, she countered.

“We’re stuck with the definition, let’s just move on,” Johnson said.

Beatty said the ordinance allows for the board to clarify things to collect the taxes it needs to collect, but it has to be done within the confines statutorily.

“Our goal and requirement is to comply with the existing statutory law,” she said.


Necessities of life

Germain said that transportation whether on a bike, bus or car is a necessity of life.

Beatty said discussion of necessity of life is necessary because otherwise, the definition is too broad, and the board may hear about it later. With board request, she is drafting some proposed definitions of necessities of life for the amendment to the ordinance.

Resort Tax District Manager Daniel Bierschwale said Beatty should take a look at the existing Montana Code Annotated (MCA), know that the board wants SNAP –the food stamp definition – included in the food piece of it and gasoline also included.

“The devil is most certainly in the details,” Beatty said. She then discussed all the gray areas with sales of certain items at enumerated establishments versus non-enumerated establishments. Enumerated establishments are businesses like bars, restaurants, resorts, etc. that pay resort tax on all things sold – aside from exempt items. It gets tricky when skis are purchased at an enumerated establishment – like the resort – and the 3% tax is charged and when skis are purchased at a non-enumerated establishment in the community and there is no resort tax charged. Fishing rods are also in a gray area with regard to resort tax.

Also discussed was business registration – identifying what businesses need to be taxed; consumer disclosure, or printing the resort tax amount on receipts; and the potential for tax waiver periods.

It is the beginning of a long journey to a clearer ordinance, which is expected to roll-out Dec. 1.

Bierschwale explained that the goal is to soon get the ordinance to about 90 percent of what the board actually wants it to be.

Beatty is expected to have a draft ordinance prepared by the end of the week. An open meeting is occurring on August 14. The 2nd draft will be completed Aug. 23 and Sept. 10 will be the first reading of the ordinance.

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