A small business owner fighting what he feels is unfair state taxation can feel pretty lonely. John Ruskey of Quapaw Canoe Company of Clarksdale has run up $20,000 in legal and accounting bills fighting a $41,000 bill from the Mississippi Department of Revenue (DOR) for sales taxes on Quapaw’s educational canoe tours from 2009 to 2012.
Ruskey hasn’t been collecting sales tax from his customers for trips, and believed he was exempt due to the U.S. Rivers and Harbors Act that prohibits state taxes on businesses operating on navigable waterways. While the Mississippi DOR has turned a deaf ear to the arguments about the federal law, the reasoning found fertile ground in the legislature. Both the Mississippi Senate and House have recently passed bills that would exempt watercraft operating on navigable waterways from paying state sales taxes on guided tours.
“We’ve had a remarkable legislative breakthrough,” Ruskey said. “If passed into law we, and any businesses like ours, will be exempt from sales taxes for river guiding services in the future. This is good news for the future of nature tourism along the lower Mississippi River.”
Ruskey had sent out an e-mail to customers and supporters detailing his frustrating and expensive disagreement with the tax department. One person who ended up receiving the email was Rep. Brad Mayo of Oxford, co-author of House Bill 1604 which amends state tax code to make guided tours, accommodations and guide services exempt from state sales taxes.
“I just happened to see an e-mail floating around asking Mississippi to comply with federal maritime law that doesn’t allow state taxes for guided tours on navigable waterways,” Mayo said. “I wondered why we were doing that if the feds say we are not supported to.”
Mayo talked to Ruskey, and learned part of the problem was that Ruskey’s business was being treated under the state tax code as an amusement business. There was no separate provision for guided tours on navigable waterways.
Mayo said he supported the legislation because he believes it is important to help nature tourism. While currently there is only one such guided tour business on the Mississippi River, Mayo said there is potential for the industry to grow.
The House bill has a three-year repeal provision. After two years, the Mississippi Development Authority Tourism Division will give a report on the consequences of the law.
“Then we will know if this is something we need to keep, or something we need to let expire,” Mayo said.
Sen. Robert Jackson, Marks, said he introduced SB 2972 at the request of constituents in the Clarksdale area.
“I just offered to assist them,” Jackson said. “That kind of business is not covered in the state code, so we had to offer a bill to add their kind of business into the state code that would exempt them from taxes. When you are in navigable waters between Arkansas and Mississippi, how could you determine whether to collect taxes for Arkansas or Mississippi? Anything we can bring in terms of tourism, especially in the Delta area, is good. We have a huge natural resource running straight through the Delta. This is a great business that we can help bring along and grow to bring more tourists into the area.”
With bills having passed both houses, it goes next to a conference committee to iron out differences between the two bills before being voted on again by both chambers. Jackson expects that since the initial bills easily passed both the House and Senate, the legislation is likely to become law.
The bill isn’t retroactive. It won’t affect Quapaw’s current tax bill, which Quapaw Canoe is appealing. It won’t take care of any legal and accountant fees.
“But it will pave the path for future fair treatment on the river for us and any others involved in this type of nature tourism,” Ruskey said. “The river angels must be watching over us. My biggest hope is we can get this set right so it paves the way for more businesses like ours to be able to pursue this very healthy endeavor. Everything about paddling is healthy. It is good exercise. People are reconnected to the environment. Study after study shows people who engage in outdoor activities are happier.”
Ruskey knows a man in Natchez who wants to start his own river guiding business. “A decision like this would certainly have a positive effect on someone like him making that decision whether to get engaged in such a risky endeavor as a small river business can be,” Ruskey said.
While Quapaw Canoe is the only current guided tour on the Mississippi River, there is a similar business in Moss Point, McCoy River Tours, that operates out of the Pascagoula River Aubudon Center. Bennie McCoy, owner of McCoy River Tours, said he hadn’t heard of the legislation, but being exempt from sales taxes would be a major boon for his business.
“It would be tremendous help,” said McCoy, who takes up to 20 people out at a time on his 24-foot-long boat. “It would be enough to help pay for some of my liability insurance.”
McCoy said it would also help because the government keeps adding new fees and restrictions on his business. For example, he operated for about ten years with being allowed 25 passengers. Now he can only take 20 passengers unless he weighs all of them, and comes in under a certain weight limit. McCoy shuddered at the thought of trying to get female passengers to step on a scale, so he has just complied with the lower passenger count.
McCoy said he was not really surprised the legislature would help nature tourism.
“There is a big push for nature tourism,” McCoy said. “On the Coast, there are a lot of big industries that are on board with it. They help out indirectly with nature tourism.”
McCoy said they offer nature tours of the unique Pascagoula River and marsh system that allow guests to experience the harder to reach small bayous and sloughs of the swamp and marsh. The Pascagoula River is the largest undammed river in the lower 48 states.
McCoy was aware of one other business on the Coast that provides guided nature tours, this one to the barrier islands.