The City of Aiken's 1 percent hospitality tax will take effect June 1, and the 220 businesses inside City limits that serve prepared meals and beverages will turn in their first month's worth of collected funds to the City's Finance Department by July 20.
Kim Abney, the City's finance director, and Nathan Campbell, the City's business license administrator, said they are in the process of mailing a letter to each business, outlining the establishments that will be affected by the tax and the financial punishments for not turning in the previous month's gross receipts on time. City Council adopted the hospitality tax Monday in a 4 to 2 vote. Mayor Fred Cavanaugh and Council members Lessie Price, Gail Diggs and Philip Merry, who proposed the tax, voted to adopt the measure. Council members Dick Dewar and Reggie Ebner voted against the tax; Council member Steve Homoki was not present.
What is taxed
The City's hospitality tax will be set at 1 percent and is a tax on the gross proceeds from the sale of prepared meals, food and beverages, which includes meals and beverages prepared in grocery stores, nursing homes, gas stations and hotels.
The City's hospitality tax will apply to any establishment that already collects a South Carolina sales tax on prepared food or beverages. The hospitality tax also will apply to businesses with an ABC beverage license for serving alcoholic beverages.
According to the letter, a business that only does an "occasional" event inside City limits will have an option of paying a one-time tax.
"You will need to collect the tax during the event you are working and remit it to the City of Aiken within five business days," the letter states. "An example of this would be a non-resident caterer doing a wedding reception or a food vendor selling at a weekend craft show."
Businesses who need more information on the hospitality tax are asked to call 803-642-7642 or email licenses@city ofaikensc.gov.
Where the tax money goes
City officials estimate that at least 60 percent of this tax will be paid by people who live outside City limits, whether County residents or tourists, bringing at least $1.2 million per year into the City.
The use of the collected funds will be divided four ways - $600,000 for business-related investments, which includes a public parking deck, $160,000 for business license relief, $110,000 for business vitality and $330,000 for enterprise capital reserves, which includes infrastructure expansion.
City officials said the generated revenue would not be lumped into the general fund, but instead placed into their own "economic investment" budget.
The first three categories would be approved as the tax revenue comes in, but the final category - enterprise capital reserves - would require Council approval before the funds are allocated or spent. Any funds left over at the end of each budget fiscal year would be placed in the reserve account.
The City's created business-license relief category affects businesses with the tax's funds.
Under this category, new businesses will receive a license rebate - 100 percent within the first year of business, 67 percent within the second and 33 percent within the third. Staff also added a section for restaurants inside City limits to receive a 50 percent license rebate every year; however, that section would require a change in the ordinance for business licenses.
The impact
After Monday's vote, businesses in the City of Aiken are trying to figure out how the tax will affect sales.
Dr. Philip Jordan, one of the owners of Up Your Alley Chophouse, said the temperature of the hospitality tax was especially high Monday night during the annual Celebrity Waiter Night, a friendly competition that raises money for local nonprofits at several downtown eateries.
"From a business standpoint, we don't want to have our customers not come out, but we're really hearing from our guests that they just don't want more taxes," he said. "I think there are some customers where this will turn them off based on their principles. ... It will have an impact."
But City officials said that when the City adopted a hospitality tax years ago, sales weren't hurt by that penny.
More than 200 other South Carolina municipalities have a hospitality tax, which includes the 1 percent hospitality tax in the City of North Augusta, about 20 minutes away from Aiken. North Augusta adopted its hospitality tax more than a decade ago, and City Administrator Todd Glover said the City receives approximately $650,000 in funds per year.
Right now, North Augusta uses all of its tax funds toward retiring bonds that paid for the construction of the Arts and Heritage Center on the first floor in North Augusta's Municipal Building. With the anticipation of Project Jackson making headway, Glover said he anticipates the tax funds will at some point go toward the project's construction.
"It's limited what we can do with the funds because it's so strictly relegated to tourism," Glover said. "I think it certainly helps having it and I guess that's probably the best way to capture funds from people who are coming in to North Augusta, either staying in a hotel or eating out."
As Project Jackson has yet to come to complete fruition, North Augusta must figure out ways to receive funds from two large CSRA events - The Masters and the Nike Peach Jam in July - according to Glover.
"The Nike Peach Jam is probably the biggest economic impact and sporting event in the CSRA, but the problem is we don't get much benefit from it because we don't have the places for people to stay, places for coaches to stay," Glover said. "Those are the things that you have to work to capture over time."
Glover said at this time he doesn't believe North Augusta's Council has intentions to raise the hospitality tax.
Maayan Schechter is the local government reporter with Aiken Standard. Follow her on Twitter @MaayanSchechter.