State allows cities to collect taxes that have expired

By Steve Wilson
January 25, 2019

Cities in Mississippi have been known to continue to collect taxes even after the tax has expired. And the legislature has supported this.

The city of Baldwyn, located between Tupelo and Booneville on U.S. 45, had its 2 percent tourism tax on restaurants and hotels expire on July 1. Despite notification from the Mississippi Department of Revenue, city businesses continued to collect the tax and have collected $11,983 from it so far this year.

When a tourism tax expires, businesses have the option of refunding customers or continuing to collect the tax and remitting it to the DOR, who then puts it in the general fund.

House Bill 653 would not only reauthorize the tax for another three years, but it’d allow the city to retroactively collect the proceeds from the now-dead tax if it is signed into law by Gov. Phil Bryant.

If HB 653 is signed into law, it’ll be the fourth time in the past three years that a reauthorization for a tourism tax also contained a provision allowing the city to retroactively collect from an expired tax.

Last year, both Southaven and Horn Lake had their tourism taxes expire. Both had provisions in the bills that reauthorized them to allow both cities to collect the tax retroactively and Gov. Bryant signed both into law.

In 2017, Senate Bill 2941 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.

In Mississippi, tourism taxes start as a local bill in the Legislature. These 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.

Once the local bill is passed, a referendum of local voters is required before the tax can go into effect. The tourism taxes 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 bills. A three-fifths majority of both chambers are required to pass a new tax, which are pitched as temporary taxes by local leaders.

But they are often reauthorized by a new bill when they expire after three years without input from local voters.

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