An influx of short-term rentals (STRs) across the Hill Country is forcing Dripping Springs leaders to formulate a plan on how to collect hotel occupancy tax (HOT) from such establishments.
On Nov. 13, the Dripping Springs City Council met with its legal staff in executive session on possibly hiring a firm to help find and audit the operation of STRs. A decision, however, was not made during the meeting.
An STR is a furnished residence that can be rented on a short-term basis. Websites such as VBRO and Airbnb cater to STRs and provide a way for clients to find nearby locations.
The popularity of STR has risen due to the increasing number of wedding venues, wineries, breweries and distilleries in the Dripping Springs area.
However, without a proper monitoring system, city officials said they are relying on STR owners to submit hotel occupancy taxes to the city, which can sometimes be overlooked if neglected.
HOT is the amount collected by hotel or motel owners for rooms rented by guests. Those who stay at a hotel or motel are charged a 6 percent state HOT, along with any local rates that may apply. Residents who stay at a Dripping Springs area hotel or motel pay an additional 7 percent HOT.
City officials are working to alleviate this issue by beginning to discuss hiring an independent company tasked to find and audit the operations. The item may return to the city council sometime in December or January.
The move could prompt business owners to report HOT to the city for collection.
Michelle Fischer, Dripping Springs city administrator, said the city may learn about an STR operation through a variety of avenues, including contact with the Chamber of Commerce, submitted site development permits or direct contact with the business owners.
Despite the system’s apparent lack of centralization, city officials said Dripping Springs is receptive to these STRs.
“We hear all the time that there aren’t enough hotels in the city,” Fischer said. “We need lodging for our tourism, so yes, I would say we are a friendly community when it comes to short-term rentals.”
Fischer said the city does not have intentions of forcing STR business owners to pay a fee or register with the city. The city looked at regulating STRs in a more strict manner around two years ago, but never moved forward with the proposals.
This decision by the city is contrary to neighboring cities such as Kyle, which has investigated the prospect of forcing business owners to register their STRs.
Kyle officials, however, have not officially approved proposed STR regulation at this time.
“Sometimes, we find out that a person is paying the state for its hotel occupancy tax, but doesn’t realize the city has one too,” Fischer said. “When we find out, we will send a standard letter to the owner about the tax outlaying what it means. If you are operating a rental, we ask to please contact the city treasurer.”