Anyone a Franchisee?

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Really weird. Did I say something insulting? I have no idea why you're being rude to me, rather than just clarifying the meaning of what you wrote.
 
Clark1961 said:
So tell us again about how these businesses exist in a vacuum and no infrastructure is required for their existence and they receive no benefit from government action. This is the same old myopic argument against taxes that folks have made for centuries. Render unto Caesar and all that.
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They pay property tax on land and buildings (and at times also on tools and inventory). That should do.
 
weilke said:
They pay property tax on land and buildings (and at times also on tools and inventory). That should do.
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You are ignoring the transient nature of the clientele and the extra services they require. But then you know that and are just ignoring it for the sake of argument.
 
Clark1961 said:
You are ignoring the transient nature of the clientele and the extra services they require. But then you know that and are just ignoring it for the sake of argument.
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You're right, sock it to them! Put more taxes on the food they buy, the gas they buy, the jobs they create, set up some toll roads - heck, tax all of it some more. Maybe they'll hurry back next year...?
That argument is absurd. I'm done, this thread has passed into the ridiculous. I'm going flying.
 
Goofy said:
You're right, sock it to them! Put more taxes on the food they buy, the gas they buy, the jobs they create, set up some toll roads - heck, tax all of it some more. Maybe they'll hurry back next year...?
That argument is absurd. I'm done, this thread has passed into the ridiculous. I'm going flying.
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Good for you. Just don't carry that denial of reality into your flying. Or not, your call entirely.
 
Just made my reservation for our annual family reunion in Port Aransas at one of Jay's competitors. (not a slight against Amelia's Landing; I have corresponded with Jay about hosting us and he doesn't have the capacity to handle our big crowd). Went to their website, selected room based on the advertised rate, and then when I paid the deposit was confronted with the occupancy tax.

Both sides have been making good points, so started wondering what the facts are. Here is the summary for those who don't want to read the whole post: Jays biggest heartburn seems to be the occupancy tax, and running some pro forms numbers show why. The occupancy tax appears to be the biggest segment of tax payments he makes. That being said, it is the one tax he has the most control over. He can reduce his occupancy tax payment by either reducing his rates, shutting down some of the rooms, or converting to apartments and doing long term rentals only.

The details:
I think these are the taxes Jay pays: US personal income tax (including self employment tax), state of Texas franchise tax, local property tax, state motel occupancy tax (6%), city of Port Aransas motel tax (7%), and taxes on utilities (gas, electricity, water, phone, cable/satellite). Don't know if he has to pay sales tax on stuff he buys for the business or if that is exempt. Also not sure about state of Texas business franchise tax. He also pays the employer half of his employees' social security. He pays state and federal gasoline tax on fuel he buys for his vehicles used for the business. There's probably more I'm not aware of.

Here is the 2017 estimated property tax bill from the public Nueces County appraisal district site (sorry for formatting). Jay pays this tax whether he is sold out for 365 days, or he gets slammed on trip advisor and doesn't sell one night all year long. It's a fixed cost. He can only indirectly affect the amount by the extent to which he maintains and improves his property, and through who he votes for Port Aransas city council and his Nueces County commissioner.

Owner: AMELIA'S LANDING INC
% Ownership: 100.0000000000%
Total Value: $1,000,300
Entity Description Tax Rate Appraised Value Taxable Value Estimated Tax
C08 CITY OF PORT ARANSAS $2,722.73
CAD APPRAISAL DISTRICT $0.00
GNU NUECES COUNTY $3,041.83
HOSP HOSPITAL DISTRICT $1,268.74
RFM FARM TO MKT ROAD $39.00
SM PORT ARANSAS ISD $11,183.35
WW NC WATER DIST #4 $0.00
Total Tax Rate: 1.825018
Taxes w/Current Exemptions: $18,255.65

By my count, Jay has 23 rooms. Let's say average in season rate is $190/night, and he is full every night from Memorial Day to Labor Day, or the "101 critical days of summer" as the USAF calls it. So 190 x 23 x101 x 1.13 = $498,748 is the total amount Jay will collect from his guests during that time (including the 13% occupancy tax). For simplicity, let's say his only other income in the year is the snowbirds. Suppose they come for 3 months at $800/month and fill up the place. $800 x 3 x 23 = 258,400 gross income with no occupancy tax. Total gross deposits to Jays bank account is $498,748 + 258,400 = 757,148.

From those gross deposits, Jay has to remit $57,378 for the occupancy tax, and 18,255 for his property tax. Then he also has to pay a mortgage, pay utilities, pay his staff, credit card fees, and a lot of other things I have no clue about. Anything leftover is his personal income, that he pays income tax and self employment tax on. I won't speculate on how much Jay pays in income tax, but for Jay's sake, I hope it is a lot.

Jays biggest heartburn seems to be the occupancy tax, and running these simple numbers show why. The occupancy tax does appear to be the biggest segment of tax payments he makes. That being said, it is the one tax he has the most control over. He can reduce his occupancy tax payment by either educing his rates, shutting down some of the rooms, or converting to apartments and doing long term rentals only.
 
Jay Honeck said:
Thank you. I was hoping someone would point out the obvious connection between this usurious tax and our lost income due to it being imposed.

Prices are always set at the maximum the market will bear at any given time. Being on a seasonal vacation destination island, I literally need a graph to tell you our room rates on any given day. The same room that is $69/night in November is $179 tonight, and these prices are set very carefully based on many historical factors. They are also highly fluid, based on many factors, including (among other things) weather.

All with a hefty 13% tax added on. If you don't think consumers are price sensitive to the cost INCLUDING THAT TAX, I've got some real estate to sell you.

Consumers don't care about the breakdown of the bill -- they react to the total number, and make their buying decisions based on the whole. To illustrate, there is still one tax-free type of hotel stay known as "long-term". Each state specifies what this means, but it is usually a stay of 30 days or longer. Beyond that, the state stops taking the 13%.**

Each winter, we fill up with snowbirds (AKA: "Winter Texans" who pay a deeply discounted rate. The rooms that are $200/night (plus tax) during the season will rent for as little as $800/month in the winter -- tax free.

Last year we tried to raise those long-term prices for the first time since we opened in 2010. We raised them just $50 per month...

...and sat empty. The Winter Texans are the perfect example of the price sensitive consumer, being on fixed incomes. A price increase of just over $1 per day caused them to look elsewhere.

We quickly dropped the price back to $800 -- and filled back up. It was a remarkable illustration of the immutable law of supply and demand, and price elasticity.

People who say "oh, that tax is on all of your competitors, so it has no impact on your bottom line" are inadvertently highlighting their lack of real world experience in business. Without that tax, the price would be EXACTLY the same -- the maximum the market will bear -- but we would get to keep it as regular income, and would therefore be able to use it for productive things -- like employee health insurance and benefits.

And airplanes. :)

** Hotel tax is 13% in Port Aransas. It was 12% in Iowa City. It is a whopping 17% in San Antonio.
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Jay- some points:
  • As you don't list the tax rate on your web page (no hotel does, standard practice that you follow), I don't know what it is until I arrive at your hotel*, and usually not until I get my bill. Your returning customers may know that rate. I just got back from a conference in Canada and found 5% GST, 8% PST, 2% MRDT, and a $4/night "hotel amenity fee" that I didn't know about until I paid my bill.
  • If Port Aransas dropped the 13% tax and you could keep that money, your web page (and 3rd party web sites) would show a rate of $226 on a room that you list for $200 now a night now. Yet the price is so sensitive that you lose business on raising rates $1 per night. It seems a contradiction here as raising your posted rates by 13% or $26, should also cause a loss of business.
  • This sounds like a political promise- lower or eliminate the hotel tax, and the benefits will "trickle down" to the hotel employees and they'll get benefits and health insurance. I'd like to think you're the exception that actually would share the benefits with the employees, but your competitors certainly won't.

*I see the 13% listed in your post. I wouldn't know the hotel tax a priori otherwise.
 
Everskyward said:
If there's not a sale, there's no sales tax, but corporate taxes tax profits, not revenue. If expenses are more than revenue, there is no profit to tax. If Jay sells $1 million worth of hotel stays, his customers will have paid sales tax on that. But if he has $1 million in expenses, he isn't going to be paying corporate tax.

When you go to the store and buy a widget for $1 plus 4 cents sales tax, in your mind, do you figure you are paying the tax or is the merchant paying the tax?
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I am. If the Merchant paid it, they'd go out of business. It passes through. In fact the scenario you describe is the most annoying thing ever. It's a $1 item and I need $2 to get it and then have a pocketful of change all day.
 
denverpilot said:
I am. If the Merchant paid it, they'd go out of business. It passes through. In fact the scenario you describe is the most annoying thing ever. It's a $1 item and I need $2 to get it and then have a pocketful of change all day.
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I like the pocketful of change, it all goes in a bowl on the dresser every evening (I never spend change). My bank has a (free) coin counter that I use when ever the bowl is full, to make a painless deposit. It covers the tax on my 3 vehicles every year . . . And I don't use cash very much anymore.
 
Clark1961 said:
You are ignoring the transient nature of the clientele and the extra services they require. But then you know that and are just ignoring it for the sake of argument.
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Then why don't we put a gross receipts tax on Walmart ? A Walmart requires about 1.5FTE police coverage just to write theft and vandalism reports for the benefit of the company.

Here is the municipal taxing algorithm by which every mayor, city council member and state representative operates under:

It moves--> tax it
It doesn't move --> tax it
It poops --> tax it
Rain falls upon it --> tax it
People rent it --> tax it

Whether something takes more or less city resources does not determine whether something gets slapped with an extra tax. The only reason something gets taxed are:
- it exists
- there is no law against taxing it
 
weilke said:
Then why don't we put a gross receipts tax on Walmart ? A Walmart requires about 1.5FTE police coverage just to write theft and vandalism reports for the benefit of the company.

Here is the municipal taxing algorithm by which every mayor, city council member and state representative operates under:

It moves--> tax it
It doesn't move --> tax it
It poops --> tax it
Rain falls upon it --> tax it
People rent it --> tax it

Whether something takes more or less city resources does not determine whether something gets slapped with an extra tax. The only reason something gets taxed are:
- it exists
- there is no law against taxing it
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Sales tax covers Walmart. I understand you have no intelligent argument so you added the nonsense which comprised the rest of your post.
 
Hank S said:
I like the pocketful of change, it all goes in a bowl on the dresser every evening (I never spend change). My bank has a (free) coin counter that I use when ever the bowl is full, to make a painless deposit. It covers the tax on my 3 vehicles every year . . . And I don't use cash very much anymore.
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Yeah, it just screws up doing a to-the-penny budget and messes with my spreadsheets is all. I do the same thing with a jar but don't really feel like tracking the jar as a separate "account" in my budget. :)
 
denverpilot said:
Yeah, it just screws up doing a to-the-penny budget and messes with my spreadsheets is all. I do the same thing with a jar but don't really feel like tracking the jar as a separate "account" in my budget. :)
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Budget by the dollar, and use change as "extra" savings. From time to time, I'll add folding money, including any extra that I get selling things I make in my woodshop. Besides earning a pitiful amount of change, my wood lathe is great stress reduction!
 
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weilke said:
Then why don't we put a gross receipts tax on Walmart?
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Because politicians must face the voters, and they (we!) remember politicos who raise taxes. It's therefore "politically expedient" to tax non-voters, i.e., tourists, businessmen and other transients. Not only are hotel taxes bad (I've been paying $22/night Room Tax on top of my $137/night Room Rate, or just over 16% in sunny Connecticut. My rental car receipt is not currently handy, but $43/day for three days seems to total up in excess of $150 . . . . (I'll look it up tomorrow and report back.))
 
Hank S said:
Budget by the dollar, and use change as "extra" savings. From time to time, I'll add folding money, including any extra that I get selling things I make in my woodshop. Besides earning a pitiful amount of change, my wood lathe is great stress reduction!
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Yeah, a million ways to do it. I track savings for specific projects inside the checking and savings accounts. Makes the balance look nice and big, but every dollar is earmarked for something, whether it's the spending or saving side of the balance sheet!

The CFI business also has its own checking account and debit card and LLC, and there's stuff moving through that also, which is way more of a PITA to track than anything else, really. Especially since its quite solidly in the "losing money rapidly" startup phase still! LOL. If I ever think about using cash to pay for anything inside the business, someone just shoot me... I'll pay for that with a few hours of figuring out how to account properly for it. Haha.
 
Clark1961 said:
So tell us again about how these businesses exist in a vacuum and no infrastructure is required for their existence and they receive no benefit from government action. This is the same old myopic argument against taxes that folks have made for centuries. Render unto Caesar and all that.
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I'm not sure how you made the leap from complaining about usurious taxes to demanding no taxes. That was never mentioned by me, or anywhere in this thread, to my knowledge.

If you think that the government should benefit more from my business than me, my wife, and all of my employees combined, well, that's your right. I don't.
 
Jay Honeck said:
I'm not sure how you made the leap from complaining about usurious taxes to demanding no taxes. That was never mentioned by me, or anywhere in this thread, to my knowledge.

If you think that the government should benefit more from my business than me, my wife, and all of my employees combined, well, that's your right. I don't.
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I didn't say you were demanding no taxes Jay. I reminded you that your business benefits from what society has built. If you don't like the cost of that talk to your congress critters. Complaining here accomplishes nothing.
 
Clark1961 said:
I didn't say you were demanding no taxes Jay. I reminded you that your business benefits from what society has built. If you don't like the cost of that talk to your congress critters. Complaining here accomplishes nothing.
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:DI don't think Jay can compensate for your lack of ability to understand the simple concept that rhetorically asking him to "tell us again .. how no infrastructure is required" is pretty much putting those words in his mouth. Classic strawman.
 
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register@teamandras.com said:
:DI don't think Jay can compensate for your lack of ability to understand the simple concept that rhetorically asking him to "tell us again .. how no infrastructure is required" is pretty much putting those words in his mouth. Classic strawman.
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The first three words of your post are correct.
 
A widget sells for $100. This price is based on a lot of stuff you learn in B-school. It covers the seller's costs, overhead, traditional margin, and market acceptance.

The Government assesses a tax as a percentage of the widget's selling price; for this example we'll use 13%. The buyer pays this tax in addition to the accepted widget price. So the bottom line price to the buyer is $113, and he accepts this as a fair trade for the widget.

Then the seller pays his business taxes and cries that the $13 should be his and he left money on the table because the buyer accepted the trade of his $113 for the widget.

I just have to scratch my head....
 
paflyer said:
A widget sells for $100. This price is based on a lot of stuff you learn in B-school. It covers the seller's costs, overhead, traditional margin, and market acceptance.

The Government assesses a tax as a percentage of the widget's selling price; for this example we'll use 13%. The buyer pays this tax in addition to the accepted widget price. So the bottom line price to the buyer is $113, and he accepts this as a fair trade for the widget.

Then the seller pays his business taxes and cries that the $13 should be his and he left money on the table because the buyer accepted the trade of his $113 for the widget.

I just have to scratch my head....
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Your example only results in zero affect on an individual seller when the tax is uniformly applied to all sellers, like a sales tax.

However, if there are competitors who don't pay the tax, think Airbnb, then those competitors can strategically position their price below $113. That would force Jay to lower his pre-tax price below $100 to compete, and make less profit, or lose the sale.

I'm sure the detrimental effect to Jay is less than the tax paid, maybe a lot less, but I scratch my head too at the assertion that only the guests pay the tax because it's a "pass-through" or because Jay collects it "for" the government. That falsely implies that the hotel tax has zero effect on Jay.

ps. I'm not arguing the hotel tax is bad or there should be no taxes.
 
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register@teamandras.com said:
Your example only results in zero affect on an individual seller when the tax is uniformly applied to all sellers, like a sales tax.

However, if there are competitors who don't pay the tax, think Airbnb, then those competitors can strategically position their price below $113. That would force Jay to lower his pre-tax price below $100 to compete, and make less profit, or lose the sale.

I'm sure the detrimental effect to Jay is less than the tax paid, maybe a lot less, but I scratch my head too at the assertion that only the guests pay the tax because that falsely implies that the hotel tax has zero effect on Jay.

ps. I'm not arguing the hotel tax is bad or there should be no taxes.
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Yeah, so Jay and his cohort should press whatever legislative body controls the tax to level the playing field.
 
Clark1961 said:
I didn't say you were demanding no taxes Jay. I reminded you that your business benefits from what society has built. If you don't like the cost of that talk to your congress critters. Complaining here accomplishes nothing.
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Complaints there won't help either. They're busy selling off everything "society" built to for-profit companies run by family friends while still collecting taxes to pay the interest on their loans.
 
Jay Honeck said:
If you think that the government should benefit more from my business than me, my wife, and all of my employees combined, well, that's your right..
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That is the new democrats. Used to be called socialism. The name has been changed to make it sound nicer. I never bought into it either.
 
Clark1961 said:
I reminded you that your business benefits from what society has built.
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It is an absurd argument that the roads, police, and fire protection are special favors to business owners who have an obligation to pay it back.
 
Zeldman said:
That is the new democrats. Used to be called socialism. The name has been changed to make it sound nicer. I never bought into it either.
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Given the tax in question, it seems both parties do this. Jay had to pay a similar tax and amount in Iowa too.
 
Cluemeister said:
It is an absurd argument that the roads, police, and fire protection are special favors to business owners who have an obligation to pay it back.
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Well, they are protected too. But property tax pays for these things (in most places). However, note post #135 which lists how the "occupancy tax" is used (some portion of it at least). The problem is that some places (Air B&B, for example) benefit from the beach and Chamber of Commerce without paying to support those things. A fair question is whether Jay gets any value from collecting the tax from his customers.
 
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