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York County dealing with hospitality tax headache

About half the restaurants in unincorporated areas of York County have not been collecting a 2 percent hospitality tax the county levied beginning Jan. 1.

York County treasurer Beth Latham said 73 establishments are actively collecting the tax from customers, compared to about 140 businesses county leaders project should be involved.

The 2 percent tax is supposed to be assessed on all prepared food and drinks served at restaurants and bars in the unincorporated areas. A 1 percent tax is supposed to be collected in the towns of McConnells, Hickory Grove, Sharon and Smyrna.

Rock Hill, York, Clover and Fort Mill already collect a separate hospitality tax, so they're exempt from the county tax. Tega Cay will collect a similar tax next year. State law requires the money be spent on tourism-related marketing and attractions.

Latham said determining which establishments need to collect the extra fee has been tedious. The county originally mailed letters to all restaurants in the county listed by the S.C. Department of Revenue asking them to begin collecting the tax, she said. Some immediately complied. Others dragged their feet but eventually got on board.

"We've picked up nearly 100 percent more from where we started," Latham said.

But dozens of others remain in the dark about collecting the money.

That's because many food service establishments aren't listed as restaurants on tax documents. They may file state taxes as a grocery or a convenience store, or as a larger company, Latham said, meaning county staff was unsure exactly which businesses needed to collect the tax.

To remedy the problem, Latham and her staff have spent weeks comparing the list of York County restaurants on file at the S.C. Department of Health and Environmental Control with the restaurants who are actually collecting hospitality taxes.

Latham found 63 county restaurants that aren't paying. They'll get a letter this week asking them to comply, she said.

"It could be more than that by the time we get through," Latham said. "It's a time-consuming process."

Latham said it's impossible to project how much revenue has been missed, but still expects to meet original projections of $1 million collected by the end of the year. So far, taxpayers in York County have coughed up more than $447,000 since the hospitality tax on prepared foods was levied more than eight months ago.

One establishment not collecting is Jump 'N' Java near Fort Mill. Owner Doug Walters said his coffee and sandwich shop on S.C. 160 never received a letter about the new tax, despite Latham's claim that Jump 'N' Java was on the initial list notified in January.

"I'm totally lost about the whole thing," Walters said. "We're not collecting it."

Walters said he didn't intentionally avoid the tax and plans to comply as soon as he learns all the details.

"I'm just worried that since I haven't been collecting it from customers, I might have to pay out of my pocket," he said.

Latham said she doesn't expect businesses to pay on past revenue. There's not a specified penalty for those who don't collect, she said, and any future action would be decided by the County Council. She just wants to make sure everyone is collecting, and paying, so the load is distributed fairly.

Al Powell, owner of the River Rat Restaurant & Pub in Lake Wylie, said he's collected hospitality taxes since the beginning of the year. He said restaurants not participating should start sharing the burden.

"They need to do it because they're part of the community, too," he said. "It will catch up to them eventually."

Powell said he isn't thrilled about the tax because most tourism dollars are spent attracting business near Interstate 77, not his rural eatery. For now, he believes it's just another burden on county residents, but hopes it pays off in the long run.

"I'm collecting it because it's the right thing to do," he said. "It's a steep tax for this part of the county. Hopefully, the county will send some of the money back out this way eventually."

Dollars collected * How it's spent

York County $447,122 Convention

and Visitors

Bureau funding,

Museum of

Western York

County funding,

council discretion

Rock Hill $1.44 million Cherry Road and

Glencairn Gardens

improvements,

Manchester

Meadows

construction

York $155,019 Recreation capital

improvements

Clover $58,900 Festivals,

downtown

beautification,

recreation capital

improvements

Fort Mill $42,889 tourism projects at

council discretion

Tega Cay Will begin collecting hospitality tax

in 2008.

* Note: All numbers are approximate.

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