Jackson Free Press

CLINTON, Miss. (AP) — Mississippi's tax collector wants to make sure people renting rooms or vacation properties online pay sales and lodging taxes.

Some people, though, told Revenue Department officials at a Wednesday hearing that the department was overstepping its legal power, as well as not correctly following procedures for issuing new government rules.

At stake is whether Mississippi and local governments will collect tax from properties rented through services including Airbnb and VRBO, which stands for Vacation Rentals By Owner.

In tourist meccas nationwide, rental services have sparked opposition, with neighbors saying owners are running commercial businesses and driving up housing costs for residents. Many cities only allow short-term rentals with a special permit. There have been few such disputes in Mississippi, with the exception of the coastal city of Ocean Springs, which has capped short-term rentals at 35.

The move comes as the Revenue Department continues to consider a rule requiring large retailers to collect taxes on internet sales. Revenue Commissioner Herb Frierson has pledged to enact that rule by the end of the month, though he acknowledges it's a challenge to U.S. Supreme Court decisions.

Revenue Department officials say the lodging rule is on firmer legal ground. The change, proposed in March, would clarify that any property that advertises itself for rent, including single family homes, must pay the state's 7 percent sales tax. Local taxes can add up to 5 percent more. Officials don't have an estimate of how much additional tax revenue the change would bring in.

Hotel owners support the change, saying others should have to pay the same taxes they pay.

"It's the Mississippi Tourism Association's position that these sorts of rentals are commercial activity in competition with the hotels and bed and breakfasts that ae paying taxes," said Chip Reno, a lobbyists for the association.

Mike Hurst, who leads the conservative Mississippi Justice Institute, told officials he believes that they are not allowed to change the current law. He pointed to lawmakers who introduced unsuccessful bills to make the change this year as proof that the Revenue Department needs more authority.

"There's nowhere in current statute that I see that authorizes the Department of Revenue to apply regulations to single-family dwellings," Hurst said.

Stephanie Rogers, head of tax policy for the department, disagreed.

"It's our reading of the statute that it includes people who are renting out rooms in their homes," she said.

One key distinction is whether someone is advertising, such as through a website. Rogers said tax officials envision a system where websites would collect the tax, not individuals.

Opponents also challenge the state on procedural grounds. Hurst said notices of the meeting were sent too late. He also said the department should have issued an economic impact statement for the proposed change. State law calls for such an analysis to be issued when the cost of complying with a rule is more than $100,000.

Ron Aldridge, chairman of state government's Small Business Regulatory Review Committee, said the committee might issue its own economic impact statement. The committee can recommend changes to rules.

Hurst said he hasn't decided if he will sue the department for violating procedures, or wait to see if officials make changes.