A new state law taking effect Jan. 1 will require that short-term rentals with fewer than three rooms pay lodgers’ tax, and the city of Roswell could see a $12,000 annual increase in its lodgers’ tax revenues as a result.
Gov. Michelle Lujan Grisham signed the legislation, Senate Bill 106, in February. A similar bill had passed in 2017, but had been vetoed by then-Gov. Susana Martinez.
The new legislation removes one of the seven exemptions in the lodgers’ tax state statute — Exemption G — that waived lodgers’ tax for short-term rentals with fewer than three rooms or property owners who did not have three rooms in total among various properties.
Short-term rentals are defined as lodging meant for stays of 30 days or less. These types of properties are often rented on such online sites as AirBnB and VRBO.
According to a legislative Fiscal Impact Report, the change to the lodgers’ tax code is expected to bring in $2.1 million more for the state general fund. Local revenues will depend on local tax rates.
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In Roswell, lodgers’ tax is 5% of the gross receipts taxes collected by hotels, motels and other lodging establishments each month, according to the Roswell City Code.
Advocates for the change said that voiding the exemption also is intended to create a fairer marketplace between hotels and motels and the smaller properties. In some cities — such as Ruidoso, Albuquerque and Angel Fire — short-term rentals are quite numerous, so the “tax loophole” impacts those cities’ tax revenues.
At the same time, supporters of the exemption removal said, the smaller properties still benefit from lodgers’ tax funds, which fund tourism-related promotions and projects.
“My particular opinion is that anyone who is offering rooms for rent should have to pay the tax,” said Edie Stevens, president of the Roswell Hotel and Hospitality Association. “That seems to make things equal, but I am sure there are many different opinions on that.”
She added that she does not speak for the local association as a whole.
The 2019 legislation, however, was supported by the New Mexico Hospitality Association, which also had pushed for a change in 2017 and commissioned a market study about short-term rentals in New Mexico.
The study by Southwest Planning and Marketing of Santa Fe released in January 2017 found that the state had 4,067 short-term rental properties, representing 9,296 rooms, with 76% owned by people who held multiple rental properties.
At that time, Roswell was shown to have 10 short-term rentals, renting for an average of $150 a night, but only two with three or fewer rooms.
A current search of AirBNB lists 55 rental properties of various sizes in or near the city Roswell, with 34 listings showing one or two bedrooms. VRBO lists 18 short-term rentals in the Roswell area, with 10 having one or two rooms.
The analysis of the legislative Fiscal Impact Report was that, with eight short-term rental properties and 22 rooms renting at $150 a night, the city of Roswell could receive just over $12,000 more in lodgers’ tax a year. But the report noted that the amount collected would depend on whether a municipality intends to take active measures to enforce the tax collection.
City Manager Joe Neeb said that the city does plan to enforce the law change.
“While the fiscal impact is negligible,” he said, “the city will assure that the rules are followed. Information will be forthcoming after the new year begins.”
He explained that the city will identify affected property owners and will assist them in understanding the law and meeting their lodgers’ tax obligations.
A $12,000 increase would be about 1% of the annual lodgers’ tax collected by the city. For Fiscal Year 2018, lodgers’ tax totaled $1.1 million. For Fiscal Year 2019, it was $1.34 million. For the first five months of the current fiscal year, the tax has totaled $605,243.
Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 311, or at email@example.com.