Utah stands to lose thousands of dollars in tax revenue during the 2002 Winter Games if hotel brokers block out a large number of rooms for more than a month.
Stays of 30 days or longer are exempt from sales tax and a 3 percent transient room tax imposed in the state's 29 counties, according to state law.
Members of the Legislature's Revenue and Taxation Interim Committee tried Wednesday to figure out the impact that would have on tax collections, particularly given the thousands of rooms the Salt Lake Organizing Committee has booked.
Counties could be out as much as $400,000, according to legislators' rough calculations.
Committee members are mulling whether to change the law for the Olympics to capture potentially lost tax income.
Ann Gambrino, executive director of the Utah Hotel & Lodging Association, said amending the law would be disastrous for the state's image. It would send a "horrible, horrible" message, she said, to welcome the world and then tax people more.
The media, particularly broadcast host NBC for which SLOC has reserved 6,000 rooms, would not look favorably on Utah, she said.
"If they see that happen, it could turn them sour in light of the scandals we had before," Gambrino said.
Legislators became concerned about the potential loss because of a Utah Supreme Court ruling against the State Tax Commission last year in a case involving the Airport Hilton Inn. The hotel contracted with an airline to provide rooms for a month-long period for employees traveling in and out of Salt Lake City, and collected neither sales nor room tax.
The high court ruled that the period of occupancy was the relevant factor in determining taxability, not whether someone actually stayed in a specific room.
SLOC says the rooms it is contractually obligated to offer will not cost the state much because it anticipates less than 5 percent of stays to exceed 30 days.
Olympic organizers have bought up 21,000 rooms — about two-thirds of those available within two hours of Salt Lake City — for a minimum 17-night stay with an option to extend, said Bob O'Neill, a SLOC accommodations manager. In addition to NBC, the accommodations are for Olympic sponsors, International Olympic Committee members, national Olympic committee members and SLOC employees, all of whom will book through the organizing committee. The average room rate is $210 per night.
To date, only 407 rooms are tied up in extended-stay hotels that have a 30-night minimum. O'Neill said. He estimated about 20 percent of the NBC rooms would fall into tax-exempt status.
O'Neill told lawmakers SLOC has asked some guests who plan a 27-day stay to consider bumping up to 30 days, which he said could bring more tourism dollars overall into the state.
"Bring more room-rent revenue but less transient (room) tax revenue," explained Sen. Howard Stephenson, R-Draper, committee co-chairman.
Rep. Judy Ann Buffmire, D-Millcreek, doesn't like Olympic organizers informing visitors about the tax exemption.
"It's surprising that SLOC would be telling people how to beat our system when we need all the revenue we can get," she said.
O'Neill said SLOC simply quotes people the law as it understands it. "We're just letting them know. We're not encouraging them one way or another," he said.
Legislators also are concerned that Internet booking agents such as priceline.com might also buy rooms in 30-day blocks to avoid passing taxes on to their customers and offer lower prices for rooms.
But Gary Thorup, a Utah hotel industry attorney, said his research shows online hotel brokers are not attempting to bypass the law. Brokers make it clear to customers that room charges will include applicable state and local taxes. And Gambrino said Utah's relatively small inventory of hotel rooms makes it almost impossible to secure groups of rooms for longer than a month.
"As far as we know, the state and the counties are not losing any money," Thorup said.
All 29 Utah counties impose the transient room tax at the maximum rate of 3 percent. Some cities also tack on a 1 percent room tax. Tax collections statewide totaled $17.4 million last year, including just over $8 million in Salt Lake County. The money is used to promote tourism and maintain convention facilities such as the Salt Palace.
Lawmakers in Wednesday's meeting didn't make a decision on whether to draft legislation to amend the law during the Olympics. Rep. Ray Short, R-Holladay, wondered if the taxation and revenue committee was "straining at a gnat" over $400,000, noting the Olympics will bring in dollars the state doesn't normal collect.
Stephenson said that even though the tax commission and hoteliers disagree over the interpretation of the law, the Legislature should perhaps stand back. "Maybe we should let this soak in," he said, "and it will go away."