The Crested Butte News Serving the Gunnison Valley since 1999
Looking for the best way to create compliance with local sales tax
By Alissa Johnson
The Mt. Crested Butte Town Council has indicated that it’s willing to have town staff do what it takes to ensure that homeowners pay sales taxes associated with short-term rentals—even take them to court. Such action is allowed by town but has yet to be exercised.
Deputy clerk Tiffany O’Connell is responsible for auditing and enforcing short-term rentals in Mt. Crested Butte. At an April 4 Town Council meeting, she informed the council that while the majority of homeowners comply and pay Mt. Crested Butte sales tax on their short-term rentals, a handful repeatedly fail to follow the process.
The issue applies only to homeowners who rent their properties themselves, rather than working with a property management company, since property managers collect the sales tax on behalf of the homeowner. O’Connell outlined the steps she follows to ensure that homeowners not using property managers are aware of the sales tax requirements and to get them into compliance—a lengthy process that some homeowners go through every time rather than complying from the beginning.
“I audit VRBO and some Airbnb just to make sure that all short-term homeowners, if they’re not using a property manager, are paying taxes.”
“When I get to my report every month to see who has paid sales tax or not, it’s my least favorite job of everything that I do,” O’Connell said, expressing frustration with the homeowners who repeatedly fail to comply.
When O’Connell finds a homeowner who isn’t paying Mt. Crested Butte sales tax, she sends an email, then a letter, and then a certified letter. If they still don’t comply, she warns the homeowners that she will place a lien against their property. She has had to follow through on that threat.
With the lien notices, O’Connell includes a fee the homeowners can pay and thereby avoid the lien. While she used to come up with what felt like an “honest number,” O’Connell said she finally resorted to asking for $3,000 in an attempt to discourage future noncompliance.
“I had a guy send me a check for the $3,000, and I’m looking at this saying, this isn’t what I want. I want you to comply,” O’Connell said.
O’Connell explained that Section 1958 of the town code allows the town finance director to issue a summons and complaint, and summons the homeowner into municipal court.
“And that is the next step I want to do,” O’Connell told the council, explaining that her goal is to get this small percentage of non-compliant homeowners—a figure she estimates to be less than 1 percent of homeowners who short-term rent—in compliance.
As noted, one homeowner just avoided a lien by sending in that $3,000, two have liens on their properties and ignore every communication she sends them, and O’Connell estimates there are another five to 10 who have to be reminded to pay sales tax every time. She would like to “skip the headache and summon them into court.”
Mayor Todd Barnes asked a number of questions to clarify the situation. “How long have you been auditing the RBOs [rental by owners]?” he asked.
O’Connell estimated that she had been auditing for about four years since taking over the process from town clerk Jill Lindros. Lindros said she had been auditing since 2008.
Barnes also wanted to clarify how O’Connell cross-referenced properties to determine which ones were being rented. O’Connell explained that she reviewed all Mt. Crested Butte listings on VRBO and used the descriptions and comments to figure out which properties they were, and whether owners were renting. She conceded that there are a few condominiums she cannot identify and has had to let those go.
“I will send a lien letter or go this route only if I am definite that I know exactly who’s short-term-renting that property,” O’Connell said. “I make pretty darn certain I can guarantee [the owners are] short-term renting their property.”
“So if you don’t use a property manager, you are liable to pay the sales tax on the rental on your own?” Barnes asked. “Just so everybody understands, you pay pillow tax for occupancy—$10, so if it sleeps six you pay $60 a year. And you generate these sales and we charge them the 13 percent?”
O’Connell said that while she informs homeowners of all tax requirements, including state taxes, she collects only the Mt. Crested Butte portion, which is 5 percent. Barnes wanted to understand if any towns collected state sales tax, and town attorney Kathy Fogo confirmed that it was not a town responsibility.
Lindros confirmed that the state has on occasion inquired about Mt. Crested Butte properties it knew to be out of compliance with state taxes, but that’s as far as the town’s involvement in state sales tax collection has gone.
As the discussion continued, it became clear that the number of short-term rentals is growing. Just over half of Mt. Crested Butte properties are available to short-term rent.
“Up until this year, I had a firm grasp on VRBOs [vacation rentals by owners] out there, but this year there are so many extra ones. There are a lot more popping up,” O’Connell confirmed. “I get frustrated. Don’t you people read the paper? Don’t you know all you need to do is call me, and I will walk you through it?”
Barnes wanted to know if there was anything the council could do to give O’Connell’s enforcement process more teeth.
Fogo responded, “We’ve been talking about it for several months off and on… If you guys say yes, we can utilize the enforcement procedures within the town’s code, that’s all we need. Those procedures are in there. It seemed like a good idea to get feedback and also let people know, henceforth if you don’t pay, you could be [getting a summons].”
Barnes still wondered if the issue could generate revenue for the town if homeowners were paying around $3,000, and that would add more teeth to enforcement. Lindros explained, “The intent is to use the summons as the teeth because the lien is not working.”
After much discussion reiterating the details, the council agreed that it made sense to notify homeowners that if they don’t pay, they will be summoned to court.
“If it’s in the code, I would move toward activating that and trying to help Tiffany,” councilmember David O’Reilly said. The rest of the council was in agreement.
O’Connell confirmed that before anyone actually receives a summons to court, they will get a letter warning them that if they don’t pay, they will be cited to appear in court.
