Short-term vacation rentals of residential homes and apartments in North Little Rock will be subject to a 3 percent hospitality tax, but only after another 60 days to give the City Council time to figure an appropriate fee for a city business license.
The ordinance approved in an 8-0 vote will apply a 2 percent Advertising and Promotion tax and a 1 percent Parks and Recreation tax to those who rent their home or part of their home to vacationers. The new requirement also will apply to bed-and-breakfast businesses, condominiums, cabins, recreational vehicle parks and campgrounds.
The tax is also to be collected at motels or hotels with fewer than 40 rooms. Those businesses have previously been collecting on a portion of the hospitality tax, while larger hotels charge the full 3 percent. The tax doesn't apply to rentals longer than 30 days.
The city proposed the changes after several North Little Rock residences became part of online vacation rental sites that advertise houses, or a bedroom or an apartment being available for visitors to stay in while in the city, bypassing hotels.
But aldermen balked at charging those residents a full $121.50 base fee for a city business permit, plus $3.60 for each room available for rent. An Advertising & Promotion permit, also required, doesn't have a fee, but the business permit is first needed to obtain the Advertising & Promotion permit.
New legislation will come back to the City Council soon, aldermen agreed, to establish a specialized business permit at a much lower cost for residents who open their homes for vacation rentals. The Council unanimously voted down an emergency clause attached to the legislation so the new requirements won't take effect for 60 days.
"I'll not vote for it with a big fee," Alderman Debi Ross said, adding that she would sponsor the future legislation to set a lower fee. "Are we hurting someone who is just wanting to make a little extra income?"
Alderman Maurice Taylor also added an amendment that unanimously passed to exclude occupancy of a real estate property prior to closing on its sale or a seller's short-term occupancy after closing.
Applying the tax only affects those who are paying to rent a residence for a short stay, and isn't a tax on the city resident, said Bob Major, executive director of the North Little Rock Advertising & Promotion Commission.
"This is a pass-through tax being collected," Major told the City Council. "This is not to take money out of their [the residents'] pocket."
Little Rock already requires its city hospitality tax to be collected by all short-term rentals, just like hotels charge customers.
Only about 10 such residences in North Little Rock are known to be on sites such as Airbnb that promote such opportunities, Major said, but regulating them is a necessity because "a year from now, there may be 40," he added.
Major said that while the vacation rentals had gotten most of the attention, the biggest tax revenue would come from the city's three RV parks, one of which the city owns on the downtown riverfront. Of $25,000 in anticipated annual revenue that will go to the Advertising & Promotion Commission, and $5,000 that annually projected to go to city parks, only about $1,500 of that will come from the vacation rentals of personal residences, he said.
Major said there is also an advantage to the short-term rentals to collect the tax because they will then be promoted by the North Little Rock Convention and Visitors Bureau, just like the bigger hotels and other city attractions.
"Every opportunity to stay in our city in a different way, we'll have on our website," he said.
Metro on 04/12/2016