By Bryan Russo, Staff Writer
Originally published July 30, 2010

OCEAN CITY — An interpretation of a state law by an unknown county official almost six years ago could have cost the town of Ocean City upwards of a million dollars in room and food and beverage tax collections.

In closed session at City Hall on Tuesday, the City Council voted to write a letter to the Worcester County Commissioners requesting that food and beverage as well as room tax be collected from non-profit organizations, as per state law, starting Oct. 1.

“Basically, it was a decision or an interpretation of the state’s law by someone in the county back in 2004 whom decided that non-profits should be exempt from paying room and food tax, just like they are exempt from sales and usage tax,” said City Solicitor Guy Ayres. “It was brought to our attention that the non-profits are not exempt from the room and food tax, and we are requesting that the county change the policy, so we can collect the revenue starting Oct. 1.”

Councilman Joe Hall was adamant in his hopes to clarify the fact the council was not instilling a new tax on non-profit organizations, but rather, pointing out a mistake or a mis-interpretation that has essentially robbed the town of Ocean City of hundreds of thousands of dollars in tax revenue each year since the decision was made.

“This isn’t a new tax, it’s just a request to be able to collect what should be collected, and should have been collected all along,” said Hall.

Ayres said that he spoke with county attorney and former commissioner Sonny Bloxom about the 2004 decision, and no one is certain who made the call to exempt the non-profits from room and food tax, but allegedly hinted that the county would make a move to make the change back to the correct fashion.

“The state’s law allows it, the county is supposed to impose it, and the town is essentially the beneficiary of it,” said Ayres. “So, for any non-profit group that comes and stays in Ocean City, they should be required to pay the room and food tax, but they will still be exempt from the sales tax.”

Mayor Rick Meehan said that town officials are uncertain to how much revenue was essentially lost since 2004, and he said it was difficult to tell which hotels were giving the exemption to the non-profit groups.

“We had made a request to the County Commissioners to have an audit done on county records to get some sort of an idea, but they have denied that request,” said Meehan.

Hall said that some non-profit groups who have a long standing relationship with the town, such as the Maryland Firemen’s Association, which has been coming to the resort for decades, could feel as though the town is targeting them in hopes of squeezing more revenue out of them.

“I hope they don’t think this is something new, it’s just something that we should have known about and fixed a long time ago,” said Hall.

From a city standpoint, the money that would be collected each year from this proposed change, which is estimated on the low end at $150,000-200,000 annually, would benefit the town’s advertising budget (which partly gets funded by a percentage of the room tax collected), and paying off the debt to the convention center (funded by the food and beverage tax).
Still, Council President Joe Mitrecic says that the only negative is the perception from the non-profit organizations who will see a change in their bill when they are in town.

“The tax was in effect until 2004, and for whatever reason, the county decided to take it out, but the fact is that our auditor pointed out to us that it should have been collected all along, and we are just asking the county to follow the law from here on out.  We aren’t looking to recoup lost revenue from years’ past,” he said.

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