Santa Fe amends tax on short-term rental properties

May 14—The city of Santa Fe has eliminated two exemptions to its lodgers' tax, which will bring it in line with state statute, city officials said.

The amendments allow the tax to be imposed on short-term rentals with fewer than three rooms and remove similar exemptions for longer-term rentals past 30 days.

The city's lodgers' tax is 7 percent of gross taxable rent for lodging at a taxable premise. According to a city fiscal impact report, the alterations are expected to generate $546,000 in yearly revenue for Santa Fe.

The exemption for smaller rentals was created in the 1970s to protect smaller bed-and-breakfast operations.

Randy Randall, the city's tourism director, said confusion over the definition of a "room" between the state and municipalities caused issues with enforcing the ordinance. According to a city memo, Santa Fe had nearly 1,000 short-term rentals in 2020, about 700 of which have fewer than three rooms available for rent. But Randall said the city only has around six short-term rentals legally registered to use the exemption.

He said the city would continue to have a difficult time enforcing the ordinance if it were not changed. To accommodate what is expected to be a flood of monthly tax payments, the city's Treasury Division likely will add a full-time employee.

The second change allows the city to collect lodgers' tax on nonresidential stays longer than 30 days. Previously, any stay booked for longer than 30 days was not taxed.

Taxes collected after the 30th day do not have the same restrictions as those collected before and will be funneled into the city's Affordable Housing Trust Fund from the 31st day onward.

"The only way now a rental can be relieved of collecting and remitting lodgers' tax is if the person is using it as their permanent [residence]," Randall said.

Randall said it is unclear how much money the city lost out on because of the exemption.

"The honest truth is we don't know because no one has tracked how much business has been lost because of longer-term rentals," Randall said. "It was at best an educated guess."

The changes go into effect May 28.