The owner says some sex workers are operating illegally in Port Macquarie, including from motel rooms.

"Why should our business be open to scrutiny from council, the Australian Tax Office, pay rates and taxes and meet all legal requirements, when there are businesses operating illegally," the owner, who did not wish to be named, said.

"These people use a call centre system, and there are at least eight women working in Port Macquarie under this system.

"They are using motel rooms for their services - which is illegal - and also raises real issues around hygiene and health and safety.

"From a purely legal perspective, you are not allowed to work from a motel room."

The owner said motel operators may be unaware of the illegal activity occurring in their rooms.

Council director Melissa Watkins says non-compliance or the illegal operation of a brothel comes with a risk.

"The operation of a brothel is regulated under legislation, including the environment and planning assessment act," Ms Watkins said.

"Brothels are required to obtain a development consent to operate and are restricted in how and where they are able to do business based on a range of factors including land use zoning.

"Council is responsible for undertaking investigations into illegal brothel operations and for ensuring legal brothels comply with the relevant approval and legislation requirements.

"Non-compliance with the relevant legislation, or illegal brothel operation, may result in warning notices, fines or business closure orders being issued."

People are encouraged to notify council on 6581 8111 if they have any concerns or suspicions related to illegal brothel operations, she said.

The brothel owner says council has the authority to cut services - water and power - to any establishment that participates in the illegal work practices.

He says council regularly inspects their premises and his employees undergo regular health checks.

"Our employees also undergo regular hepatitis and sexually related diseases checks, while our business also pays extra rates for rubbish services," he said.

"However, these other girls may be working in unhygienic situations - using the same towels and bed sheets - which is a real concern."

Brothels are not able to operate within 250 metres of a school, where children gather, a dwelling, another brothel or adult sex shop, a major transport hub or a church.

"Our business also has restrictions determining where we can and can't operate," he said.

"Every council in NSW has designated a site or area where a brothel can operate.

"I want council to take on this issue. Council is really the only authority that can act - the police are no longer involved in this process," he said.

The owner said council had acted on his complaints with surveillance being undertaken in the past.

"If council doesn't act again, it will make it harder for us to remain a viable business," the owner added.

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