Grover Beach proved that the price of skipping bed tax payments may be higher than remitting a cut of the rent to the city itself.
Former local short-term rental owner, Allen Thompson, felt the financial pinch when the city sued him on Jan. 20 for failing to pay transient occupancy taxes (TOT) from 2019 to 2022. According to the Grover Beach municipal code, all hotel or motel operators must pay the city a 12 percent share of the rent charged.
“Every owner or operator is to hold all TOT taxes in trust for the city until payment is made to the city,” the complaint read.
After a heated debate with the City Council at its Aug. 22, 2022, meeting, Thompson said he decided he didn’t have to pay the tax based on his interpretation of the definition of a hotel and a comment made by then Mayor Jeff Lee during a private conversation. That hearing ended with the city revoking Thompson’s rental operation license.
At that meeting, the city estimated that his missed payments totaled up to a little more than $16,000—an number that City Attorney David Hale called “woefully deficient.” The city was unable to zero in on the exact taxes owed because Thompson had refused to get his accounting books audited. According to the city’s lawsuit, the initial number jumped to almost $30,000 based on an updated tally.
Grover Beach sued Thompson for nine causes of action, including statutory liability for unremitted TOT, fraud, and negligent misrepresentation. The lawsuit stated that not only does Thompson have to pay the amount of missed taxes owed, but he has to do so with an interest rate of 1.5 percent per month.
Thompson didn’t respond to New Times‘ request for comment by press time.
Hale told New Times that a solution is in the works after meeting with Thompson and his attorney on Feb. 7 at City Hall.
“We had a solemn negotiation this morning and came to a settlement amount. I can’t disclose that amount because it’s only a verbal agreement so far,” Hale said. “We are waiting for the City Council and the defendant to sign the paperwork.”
Once signed, Hale said that the city will pull the lawsuit. He added that he will present details of the settlement, including the agreed upon amount of money owed to Grover Beach, at the next City Council meeting on Feb. 14. Δ
This article appears in Feb 9-19, 2023.
