The Town of Carthage passed an ordinance to levy a 1% hotel occupancy tax during a special called meeting on February 23, 2021.
Late last year, it was discovered that Carthage had been collecting a 5% hotel occupancy tax since 2003 without proper enactment. In 2003, the state legislature amended the town’s charter through a private act to authorize the town to collect a hotel occupancy tax. The town ratified the amended charter, including the authorization to levy the tax; however, the town never enacted the tax through an ordinance due to procedural error.
During the January 2021 meeting of the Carthage City Council, the first reading of an ordinance to levy a 5% hotel occupancy tax was introduced to correct the previously discovered oversight. A motion to pass the first reading was tied by a vote of 3-3, with Mayor Smith casting a tiebreaking yes vote for the motion to carry.
At the February 2021 meeting of the council, the ordinance was brought forth for a second reading as required by state statute. After discussion, including the city attorney explaining the situation, no motion was made to approve the second reading. It was determined that the city would immediately cease collecting the tax since no enactment of the tax had ever been made.
The second reading of this ordinance was added a second time to the special called meeting on February 23, 2021 after the Smith County Commission passed a resolution asking the state legislature for a private act to allow the county to levy a hotel occupancy tax during its February 2021 meeting. The county had been discussing this idea prior to the Town of Carthage’s actions. The county was not projecting receiving hotel occupancy tax from the towns of Carthage or Gordonsville. The county would not be able to collect the tax within the boundaries of these cities due to a hotel occupancy tax being previously enacted by them; however, with Carthage no longer having a hotel occupancy tax, the county would be able to collect the tax from within the city limits if its request passed the state legislature and was enacted by the county commission.
A motion was made during the special called meeting on February 23rd to pass the second reading of the ordinance as written with a 5% hotel occupancy tax. The motion was discussed, and an amendment was made to lower the hotel occupancy tax to 1%. The amended motion to enact a 1% hotel occupancy tax passed by a vote of 4-2. With the passage of the hotel occupancy tax within Carthage’s municipal boundaries, the county will not be able to collect its own tax within the city limits even if it levies a higher hotel occupancy tax than the town.
