Memo - Consideration of a Local Lodging Tax
ADMINISTRATIVE SERVICES
DEPARTMENT
MEMORANDUM
To:
FROM:
DATE:
SUBJECT:
Honorable Mayor and Members of the City Council
Steve Stahmer, Assistant to the City Manager
May 25, 2001
Considerati9n of a Local Lodging Tax
Minnesota Statutes 469.190 authorizes cities to impose, by ordinance, a lodging tax of up to 30/0
on the gross lodging receipts of hotels, motels, rooming houses, tourist courts and resorts. The
tax does not apply to accommodations rented for 30 days or more. Most cities that have
implemented the tax have imposed the full 30/0.
Ninety-five percent of the tax revenues collected must be used to fund a tourism and/or
convention bureau for the purposes of marketing and promoting the City as a center for tourism
or conventions. The remaining 5% may be retained by the City to defray the costs of
administering the tax.
In order to impose the lodging tax, the City will need to create a Tourism Bureau and/or appoint
a Tourism Director that would be funded by the tax. Those duties may be absorbed into an
existing City department/position. The bureau/department would actively market and promote
the City as a center for tourism and/or conventions.
The sample ordinance being presented to the Council is based in large part on the ordinances
of Roseville, Coon Rapids and Rochester. Sections have been taken from each of these
ordinances and modified in an attempt to best suit Hopkins.
Estimated Revenue Impact
Currently, only one lodging house operates within the City of Hopkins. The Hopkins House is a
120-room hotel located at 1501 Highway 7 in Hopkins. Unless and until additional hotels/motels
locate within the City, lodging receipts from the Hopkins House would be the only source of
revenue under this tax. For this reason and others, it is recommendedthat the City impose the
maximum tax of 30/0 if the tax is implemented. All new hotels or motels that open for business
within Hopkins would be equally subject to the tax. Currently, the Hopkins House is planning a
major renovation that will result in the number of rooms available for lodging being reduced to
94. The approximation on Page 2 of this memo attempts to estimate the revenue that would be
generated by the tax. It may be possible to obtain a more accurate estimate - through
discussions with the Hopkins House - should the Council decide to pursue implementation of
the lodging tax.
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Estimated Yearly Lodging Tax Revenue
Assumptions:
Hopkins House:
Est. Occupancy Rate:
Average Room Cost:
Lodging Tax Rate:
120 rooms before proposed renovation, 94 after renovation
50%
$70/night (2 adults)
3%
A. Estimate Without Renovation ( 120 rooms)
120 rooms X 0.5 = 60 occupied rooms per night
60 rooms X $70 per night = $4,200 in daily receipts
$3,600 X 365 days/year = $1,533,000 in yearly receipts
$1,533,000 X 0.03 = $45.990 estimated yearly tax revenue
B. Estimate Followinq Renovation (94 rooms):
94 rooms X 0.5 = 47 occupied rooms per night
47 rooms X $70 per night = $3,290 in daily receipts
$3,290 X 365 days/year = $1,200,850 in yearly receipts
$1,200,850 X 0.03 = $36.026 estimated yearly tax revenue
Maior Elements of the Sample Proposed Lodaing Tax Ordinance (as currently written):
1. The ordinance imposes a 30/0 tax on the gross receipts for lodging at hotels, motels, rooming
houses, tourist courts, and resorts within the City of Hopkins.
2. Ninety-five percent (950/0) of the proceeds from the tax must be used to fund lIa local
convention or tourism bureau for the purpose of marketing or promoting the city or
town as a tourist or convention center." (M.S. 469.190)
3. The tax applies only to transient lodging (a stay fewer than 30 days). The tax does not
apply to lodging for a continuous period of 30 days or more to the same lodger.
4. The City Finance Director will administer and enforce the assessment and collection the
lodging tax.
5. Lodging house operators will be required to file a monthly return and remit payment within
25 days of the end of each month (See sample form below).
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6. A penalty of 100/0 will be added to delinquent payments (those payments not received within
25 days after the end of the month for which they are due). If delinquency extends beyond
30 days after payment is due, the estimated tax payment plus all interest and penalties will
be added to the establishment's property taxes, or, alternatively, the City Attorney may take
appropriate action.
7. An owner/operator will be guilty of a misdemeanor for any of the following reasons:
\
a. Willfully failing to make a required return;
b. Failing to pay the tax after written demand for payment;
c. Failing to remit the taxes collected or any penalty or interest imposed after written
demand for such payment;
d. Refusing to permit the City to examine the books, records and papers under his or
her control; and
e. Willfully making any incomplete, false or fraudulent return.
Lodging Taxes/Tourism and Convention Bureaus in Other Cities
Roseville - Tax revenue is collected by the city and transferred to the Roseville Visitors
Association (the city handles all accounting for the Association). The
Association is incorporated separately from the city and the board is comprised
of members from the city, the community, and hotel operators. Tax revenue is
used as general funding for the Association. The Association's primary
purpose is "to fill hotel rooms." (Ed Burrell, Treasurer and Finance Director)
Coon. Rapids - Collected tax revenue goes directly to a Visitor and Convention Center and is
used largely to promote local hotels, businesses and attractions to visitors
(often teams and spectators attending sporting events at the National Sports
Center). Local hotels wanted the tax to help promote the city cs a
tourisUconvention destination. (Sharon Legg, Finance Director)
Leaal Issues
As written in the statute (M.S. 469.190), tax proceeds must be used to fund a convention or
tourism bureau which markets and promotes the City as a center for conventions and/or
tourism. A current employee in an existing City position could be named the City Tourism
Director, with all or a portion of that position's salary to be paid with lodging tax proceeds. That
position must be involved in marketing/promoting the City, local conventions, tourist attractions
and/or local businesses. If the position does not already involve such responsibilitie~ those
duties would need to be added the position. The benefit of this scenario would be that money
from the general fund, which is currently used to pay the employee's salary, would be available
for other uses such as funding existing City facilities and attractions.
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Questions and Next Steps
Questions to consider:
1. Does the council wish to pursue implementation of a local lodging tax?
2. What, specifically, would the tax revenue be used for? What are the goals to be achieved
by implementing the tax? Possibilities include:
a. Paying all or part of the salary of a City Tourism Director (a current employee).
b. Marketing and promoting the City (as a whole) as a tourist destination.
c. Promoting the City as a convention center.
d. Promoting private businesses, tourist destinations and/or convention facilities.
e. A combination of the above goals and objectives.
f. Other means of marketing/promoting the City as a tourism/convention center.
The followinq tasks would be loqical steps in the process of implementinq the lodqinq tax:
1. Staff will discuss proposed tax with the Hopkins House. Determine their position on the tax,
their concerns and how the City can work together with the Hopkins House to insure smooth
implementation of the tax. Attempt to calculate a more accurate estimate of expected tax
revenues.
.
2. Determine how other cities have implemented the tax and where the revenue has gone.
What is the size and scope of the tourism and convention bureaus created by those cities?
3. Determine the necessary and desirable composition and responsibilities of the Hopkins
tourism/convention bureau or department if created. Name a City Tourism Director.
4. Continue to research legal issues.
5. Develop draft and final ordinances.
6. First and second readings of the ordinance.
7. Adoption of ordinance.
8. Publish ordinance.
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Sample Monthly Lodgina Tax Return
Name and Address of Establishment:
Return for the Month of (MN):
State Sales Tax Account Number:
Please attach a copy of the "Minnesota State Sales and Use Tax Return" as submitted for the
period covered by the return.
I declare and certify under penalty of law that I have, as a duly authorized agent, examined this
statement and that to the best of my knowledge and belief it is true and complete.
Signature
Date
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MINNESOTA STATUTES
469.190 Local lodging tax.
Subdivision 1. Authorization. Notwithstanding section 477A.016 or any other law, a
statutory or home rule charter city may by ordinance, and a town may by the affirmative vote of
the electors at the annual town meeting, or at a special town meeting, impose a tax of up to three
percent on the gross receipts from the furnishing for consideration of lodging at a hotel, motel,
rooming house, tourist court, or resort, other than the renting or leasing of it for a continuous
period of 30 days or more. A statutory or home rule charter city may by ordinance impose the
tax authorized under this subdivision on the camping site receipts of a municipal campground.
Subd. 2. Existing taxes. No statutory or home rule charter city or town may impose a tax
under this section upon transient lodging that, when combined with any tax authorized by special
law or enacted prior to 1972, exceeds a rate of three percent.
Subd. 3. Disposition of proceeds. Ninety-five percent of the gross proceeds from any tax
imposed under subdivision 1 shall be used by the statutory or home rule charter city or town to
fund a local convention or tourism bureau for the purpose of marketing and promoting the city or
town as a tourist or convention center. This subdivision shall not apply to any statutory or home
rule charter city or town that has a lodging tax authorized by special law or enacted prior to 1972
at the time of enactment of this section.
Subd.4. Unorganized territories. A county board acting as a town board with respect to an
unorganized territory may impose a lodging tax within the unorganized territory according to this
section if it determines by resolution that imposition of the tax is in the public interest.
Subd. 5. Reverse referendum. If the county board passes a resolution under subdivision.4
to impose the tax, the resolution must be published for two successive weeks in a newspaper of
general circulation within the unorganized territory, together with a notice fixing a date for a
public hearing on the proposed tax.
The hearing' must be held not less than two weeks nor more than four weeks after the first
publication of the notice. After the public hearing, the county board may determine to take no
further action, or may adopt a resolution authorizing the tax as originally proposed or approving
a lesser rate of tax. The resolution must be published in newspaper of general circulation within
the unorganized territory. The voters of the unorganized territory may request a referendum on
the proposed tax by filing a petition with the county auditor within 30 days after the resolution is
published. The petition must be signed by voters who reside in the unorganized territory. The
number of signatures must equal at least five percent of the number of persons voting in the
unorganized territory in the last general election. If such a petition is timely filed, the resolution
is not effective until it has been submitted to the voters residing in the unorganized territory at a
general or special election and a majority of votes cast on the question of approving the
resolution are in the affirmative. The commissioner of revenue shall prepare a suggested fonn of
question to be presented at the referendum.
Subd. 6. Joint powers agreements. Any statutory or home rule charter city, town, or
county when the county board is acting as a town board with respect to an unorganized territory,
may enterinto a joint exercise of powers agreement pursuant to section 471.59 for the purpose of
imposing the tax and disposing of its proceeds pursuant to this section.
Subd. 7. Collection. The statutory or home rule charter city may agree with the
commissioner of revenue that a tax imposed pursuant to this section shall be collected by the
commissioner together with the tax imposed by chapter 297 A, and subject to the same interest,
penalties, and other rules and that its proceeds, less the cost of collection, shall be remitted to the
city.
HIST: 1987 c 291 s 191; 1989 c 277 art 1 s 30; ISp1989 c 1 art 8 s 1-3; 1990 c 604 art 6 s 6-8
Copyright 2000 by the Office of Revisor of Statutes, State of Minnesota.
1,~.-,-. -:;JT~ ~ ~7 '"' ~'"^-
C;.j..;.e - ~ ~-IIf~'"
Minlle50Q Ci ties, TOWILS and U norgani:zed Territory
Whkh Impose a Lodging Room Ta)t for Tourism Promotion.
City
Albert Lea ,
ASh RiYer (unorganized ~rri[ory)
Austin
Baudette
~Tax
3
3
3
3
B~~i 3
Bloomington 6
Blue Earth 3
Brooklyn Center 6
Brooklyn" Park 3
Bumsville 3
Olisholm 3
Caledonia Township 3
Camino To\VI1ship 3
. Carrolton Township 3
Cloquet 1 ~
Chne Lake (unorganized tonitory) 3
Detroit Lakes 2
Duluth 6
E. Grand Forks 2
.~ 3
Ely & 2 Townships 3
Ev~e~ 3
F~nt 3
Fario8Wt 3
FeIJUS Falls 3
Fountain 3
Fountain Township 3
Fridley 3
Orand Marais 3
Grand Rapids 3
Gunflint Trail 2
Hannony 3
Hibbing 3
Hill City 3
Hou1te Township 3
Houston 3
Hutchinson 2
Int Fa11sIIs1&nd View 2
K.abetogama (unorganized territory) 3
La Prairie. 3
I..ak:e of the Woods County 3
(unorpnized tern tory)
Lanesboro 3
Little Falls 3
Lu~ 3
Mabel 3
- ...-
-.c.....:.
PurposelRestriction
with Qrr, Crane Lake & KabetOgAIna
with Lake of the Woods
(County . U norganiz.ed taritory)
.
.
.
..
..
1 %* 2% shopping center 3% city If
..
3% City 3%-
with Scinlon
with Orr. Ash River & Kabetogama
.
.
.*
*
.
.
.
.
.
split between CYB-Depot-Spirit Mt-City
.
..
Range wide .
Range wide
with Grmd Rapids
. with Qrr, Crane Lake.& Ash RiYel"
wilh Orand Rapids
with Baudette
wfth Schroeder &- Tofte
.
.
.
.
.
.
.
*
.
*
*
*
.
*
.
*
"
.
.
.
.
.
.
1 %. 2 % golf :ourse
. to Historic Bluff Count!j'
4
,~~:: lJ:32 ~ : =.2:
Afinneapolis 6 3% City ~ 3% convention center (more the 50 rooms)
~ontevideo 1 ~ ·
Moorhead 3 ·
Mountain Iron 3 Range wide ·
~wmm 3 ·
Nocthfield 3 ·
North Mankato 3 with Mankato ·
O~~ 3.'
Orr 3 *.
Osakis &: Townships . 3' ·
Owatonna 3 " *
Park Rapids 3 ·
Pilot Mount Township 3 *
Pipestone 3 ..
Preston 3 ·
RedwoodPalls 3 ·
~~~~ 3 *
ochestcr 3 city #-
Rushford . 3 ..
St Cloud 5 3% CVB 2% Convention Center .
SL Paul 6 39&* (more than SO rooms) 3% at)'
~t. Peter 3 ..
_auk: Rapids 3 with St. Coud *
Scanlan IIh with Cloquet ...
Scbroeder 3 with Tofte & Lutsen 1 %* 2% golf course
Shakopec 3 "
SPring Grove 3 "
Sugar Hills 3 \Vith Grarrl Rapids ·
Thief River Falls - 2 ·
Tofte 3 with Schroeder &: Lutsen 1 %* 2% golf course
. Two HarbOrs 3 2%*.1% Tug Boat
Virginia . 3 Range wide -* -
Waite Park 3 \Vim Sl CloUd *
\Vi1lmar 3 ·
Wmona 4 3 Yz%* '11% museum
Worthington 2 ~ . ·
.. 95% of recd.pts must be used to fund a Conventioa & Visitors Bureau to advertise & promote the area ~ a
visitor andlcx convention area. -
It Citysuppot1S Convention & VISitor Bureau (CYB).
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CITY OF HOPKINS
SAMPLE LODGING TAX ORDINANCE
1. DEFINITIONS:
As used in this Chapter, the following words and terms shall have meanings given to
them by this Section:
CITY: The City of Hopkins.
FINANCE DIRECTOR: The Finance Director of the City of Hopkins or designated agent.
LODGER: The person obtaining lodging from an operator.
LODGING: The furnishing for consideration of lodging by a hotel, motel, rooming house,
tourist court, or resort, except where such lodging shall be for a continuous period of
thirty (30) days or more to the same lodger.
OPERATOR: A person who provides lodging to others, or any officer, agent or
employee of such person.
PERSON: Any individual, corporation, partnership, association, estate, receiver, trustee,
executor, administrator, assignee, syndicate or any other combination of individuals.
Whenever the term "person" is used in any provision of this Chapter prescribing and
imposing a penalty, the term as applied to a corporation, association, or partnership,
shall mean the officers, or partners thereof as the case may be.
RENT: The total consideration valued in money charged for lodging whether paid in
money or otherwise, but shall not include any charges for services rendered in
connection with furnishing lodging other than the room charge itself.
2. IMPOSITION OF TAX:
There is hereby imposed a tax of three percent (30/0) on the rent charged by an operator
for providing lodging to any person. The tax shall be stated and charged separately and
shall be collected by the operator from the lodger. The tax collected by the operator
shall be a debt owed by the operator to the City and shall be extinguished only by
payment to the City. In no case shall the tax imposed by this Section upon an operator
exceed the amount of tax which the operator is authorized and required by this Chapter
to collect from a lodger.
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Sample Lodging Tax Ordinance
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3. COLLECTIONS:
Each operator shall collect the tax imposed by this Chapter at the time rent is paid. The
tax collections shall be held in trust by the operator for the City. The amount of tax shall
be separately stated from the rent charged for the lodging.
4. EXEMPTIONS:
An exemption shall be granted to any person as to whom or whose occupancy it is
beyond the power of the City to tax. No exemption shall be granted except upon a claim
therefor made at the time the rent is collected and such a claim shall be made in writing
under penalty of perjury on forms provided by the City. All such claims shall be
forwarded to the City when the returns and collections are submitted as required by this
Chapter.
5. ADVERTISING NO TAX:
It shall be unlawful for any operator to advertise or hold out or state to the public or any
customer, directly or indirectly, that the tax or any party thereof will be assumed or
absorbed by the operator, or that it will not be added to the rent or that, if added, it or
any part thereof will be refunded. In computing the tax to be collected, amounts of tax
less than one cent ($0.01) shall be considered an additional cent ($0.01).
6. PAYMENTS AND RETURNS:
A. The taxes imposed by this Chapter shall be paid by the operator to the City not
later than twenty five (25) days after the end of the month in which the taxes were
collected. At the time of payment, the operator shall submit a return upon such
forms and containing such information as the Finance Director with council
approval may require. The return shall contain the following minimum information:
1. The total amount of rent collected for lodging during the period covered by the
return.
2. The amount of tax required to be collected and due for the period.
3. The signature of the person filing the return or that of an agent duly authorized in
writing.
4. The period covered by the return.
5. The amount of uncollectible rental charges subject to the lodging tax.
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Sample Lodging Tax Ordinance
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6. A copy of the "Minnesota State Sales and Use Tax Return" submitted by the
operator for the period covered by the return.
B. The operator may offset against the taxes payable with respect to any reporting
period, the amount of taxes imposed by this Chapter previously paid as a result of
any transaction the consideration for which became uncollectible during such
reporting period, but only in proportion to the portion of such consideration which
became uncollectible.
7. EXAMINATION OF RETURN, ADJUSTMENTS, NOTICES AND DEMANDS:
The Finance Director may rely upon the "Minnesota State Sales and Use Tax Return"
filed by the operator with the State in determining the accuracy of a return filed under
this Chapter. However, the Finance Director shall be authorized to make any
investigation or examination of the records and accounts of the person making the
return, if the Finance Director reasonably determines that such steps are necessary for
determining the correctness of the return. The tax computed on the basis of such
examination shall be the tax to be paid. If the tax due is found to be greater than that
paid, such excess shall be paid to the City within ten (10) days after re.ceipt of a notice
thereof, given either personally or sent by registered mail to the address shown on the
return. If the tax paid is greater than the tax found to be due, the excess shall be
refunded to the person who paid the tax to the City within ten (10) days after
determination of such refund.
8. REFUNDS:
Any person may apply to the Finance Director for a refund of taxes paid for a prescribed
period in excess of the amount legally due for that period, provided that no application
for refund shall be considered unless filed within one year after such tax was paid, or
within one year from the filing of the return, whichever period is the longer. The Finance
Director shall examine the claim and make and file written findings thereon denying or
allowing the claim in whole or in part and shall mail a notice thereof by registered mail to
such person at the address stated upon the return. If such claim is allowed in whole or
in part, the Finance Director shall credit the amount of the allowance against any taxes
due under this Chapter from the claimant and the balance of said allowance, if any,
shall be paid by the Finance Director to the claimant.
9. FAILURE TO FILE A RETURN:
If any operator required by this Chapter to file a return shall fail to do so within the time
prescribed, or shall make, willfully or otherwise, an incorrect, false, or fraudulent return,
the operator shall, upon written notice and demand, file such return or corrected return
within five (5) days of receipt of such written notice and shall at the same time pay any
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Sample Lodging Tax Ordinance
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tax due on the basis thereof. If such person shall fail to file such return or corrected
return, the Finance Director shall make a return or corrected return, for such person
from such knowledge and information as the Finance Director can obtain, and assess a
tax on the basis thereof, which tax, less any payments theretofore made on account of
the tax for the taxable period covered by such return shall be paid within five (5) days of
the receipt of written notice and demand for such payment. Any such return or
assessment made by the Finance Director shall be prima facie correct and valid, and
such person shall have the burden of establishing its incorrectness or invalidity in any
action or proceeding in respect thereto.
10. PENALTIES:
A. Any operator failing to make payment within the 25-day collection period specified
in this ordinance shall be required to pay a penalty equal to ten percent (1001<>) of
the tax due. If the delinquency continues beyond 30 days after the tax is due, said
delinquent taxes, plus penalty as hereto provided, shall be estimated by the
Finance Director and entered, shown and placed on the tax assessment rolls of the
City for the establishment generating the delinquency, or the City Attorney may
commence such action necessary to collect the tax and penalties due including all
costs of collection - including but not limited to attorney's fees.
B. All payments received shall be credited first to penalties and interest, and then to
the tax due.
11. ADMINISTRATION OF TAX:
The Finance Director shall administer and enforce the assessment and collection of
taxes imposed by this Chapter. The Finance Director shall cause to be prepared blank
forms for the returns and other documents required by this Chapter and shall distribute
the same throughout the City and furnish them on application, but failure to receive or
secure them shall not relieve any person from any obligation required of him or her
under this Chapter.
12. EXAMINATION OF RECORDS:
The Finance Director and those persons acting on behalf of the Finance Director and
authorized in writing by the Finance Director, may examine the books, papers and
records of any operator in order to verify the accuracy of any return made, or if no return
was made, to ascertain the tax as provided in this Chapter. Every such operator is
directed and required to give to the Finance Director, or such other authorized agent or
employee, the means, facilities and opportunity for such examinations and
investigations as are hereby authorized.
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Sample Lodging Tax Ordinance
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13. VIOLATIONS:
Any person who shall willfully fail to make a return required by this Chapter; or who shall
fail to pay the tax after written demand for payment; or who shall fail to remit the taxes
collected or any penalty or interest imposed by this Chapter, after written demand for
such payment; or who shall refuse to permit the City to examine the books, records and
papers under his or her control; or who shall willfully make any incomplete, false or
fraudulent return shall be guilty of a misdemeanor.
14. USE OF PROCEEDS:
Ninety-five percent (950/0) of the proceeds obtained from the collection of taxes pursuant
to this Chapter shall be used in accordance with Minnesota Statutes section 469.190,
as the same may be amended from time to time, to market and promote the City as a
tourist or convention center.
15. APPEALS:
A. Any operator aggrieved by any notice, order or determination made by the Finance
Director under this Chapter may file a petition for review of such notice, order or
determination detailing the operator's reasons for contesting the notice, order or
determination. The petition shall contain the name of the petitioner, the petitioner's
address and the location of the lodging subject to the order, notice or
determination.
B. The petition for review shall be filed with the City within ten (10) days after the
notice, order or determination for which review is sought has been mailed or served
upon the person requesting review.
C. Upon receipt of the petition, the City Manager, or the Manager's designee, shall set
a date for a hearing and give the petitioner at least five (5) days' prior written notice
of the date, time and place of the hearing.
D. At the hearing, the petitioner shall be given an opportunity to show cause why the
notice, order or determination should be modified or withdrawn. The petitioner may
be represented by counsel of petitioner's choosing at petitioner's own expense.
16. CONFIDENTIAL INFORMATION:
No officer or employee of the City shall divulge or otherwise make known in any manner
any particulars disclosed in any return required by this chapter, or any information
concerning the affairs of the person making the return acquired from such person's
records, officers, or employees while performing an examination or audit, except in
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connection with a proceeding involving taxes due under this chapter from the person
making such return. Nothing herein contained shall be construed to prohibit the director
from publishing statistics so classified as not to disclose the identity of particular returns
and the contents thereof.
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Sample Lodging Tax Ordinance