More short-term rentals need to pay the hotel-motel tax, Lawton officials say

The City of Lawton is seeing an increase in hotel-motel tax revenue after a 2023 decision to apply the required tax to short-term rentals.

But city administrators say there are far more short-term rental sites in Lawton ignoring the city requirement to pay the 7 percent occupancy tax commonly called the hotel-motel tax.

While the City Council decided in 2020 to assess the 7 percent Hotel/Transient Guest Occupancy Tax on short-term rentals such as Airbnb and similar establishments, it wasn’t until Fall 2023 that the city began strongly enforcing the law. City code requires such establishments to register with the city and obtain annual licenses to operate, and to remit the occupancy tax that has been levied on hotel and motel room rentals in Lawton for decades.

Council members, voting last week on the disbursement formula used to convey those funds to entities and programs, were told the tax was expected to generate $2.32 million in the fiscal year that began July 1. Revenues have begun climbing again after several years of decline.

City Manager John Ratliff said much of the increase projected this fiscal year can be attributed to short-term rentals now paying the tax. He also said while there are about 100 operators registered with the city (meaning, paying the tax), city staff has estimated there actually are about 400 operating in Lawton, based on a search of internet rental sites. Those who are not registered are not paying the tax.

Ratliff said part of the problem is Lawton city code isn’t strong enough, explaining there are not “sufficient enforcement mechanisms in law.” Today, Lawton’s strongest enforcement tool against those they find operating without a license and refusing to pay the tax is to cut off water service until they comply with the law.

“We rely on them to report,” he said of what city officials describe as a self-reporting system.

That isn’t enough, Ratliff told the City Council Tuesday, saying he is preparing a recommendation for council consideration that will change the penalties against non-compliant entities, and a change in software used to track such entities.

Lawton can draw from the examples of peer cities, he said. For example, Norman city code allows the city to jail those who don’t pay the tax. Other cities “have hefty fines,” he said.

Ratliff said attorneys also are researching legal options against franchise operators who refuse to collect the tax from their members. Attorneys have said some of the nation’s largest short-term rental agencies refuse to collect occupancy taxes from their members and remit to communities where the tax is required. Ratliff said the legal research will be brought back to the council for discussion.

When the City of Lawton moved forward with plans to strongly enforce the hotel-motel tax payment provision, city finance officials had estimated it could mean $300,000 to $400,000 more in revenue. They also said that was a rough estimate based on the estimated number of short-term rental sites in Lawton.

Under the ballot resolution that created the hotel-motel tax, revenue by that tax is restricted to expenditures that encourage, promote and foster conventions, tourism, industrial development and economic development in Lawton. City code specifies that no one may operate a short-term rental or hotel in Lawton without obtaining the proper license from the City of Lawton, which is to be renewed annually. Those that fall under the provision range from hotel and motel rooms, to bed-and-breakfasts and transient guest homes.