Cities, Counties Still Scrambling for Revenue from Changing Transient Lodging Models

As the digital age has caused the decline of many business models – among the casualties: video stores, record stores, encyclopedias, and travel agencies, but for some reason not landline long-distance service – state and local governments have struggled not to die with their host organisms. Today we look at cities’ and counties’ ongoing efforts to keep pace with the lodging industry.   

For several years now city and county taxing authorities have been looking to online travel companies (OTCs) as a potential source of expanded lodging tax revenue. To this end, these taxing authorities have sought to have their lodging taxes applied to the total amount customers pay to OTCs to rent rooms, rather than on the lower amount actually paid to the hotels by the OTCs. This has been a losing argument so far this year, with OTCs winning cases in Hawaii, Florida, and, just last week, North Dakota. You can read more about these developments in Michael Bologna’s recent article in Bloomberg BNA’s Daily Tax Report. 

Compared to the OTC model, local governments have only recently begun to address the sharing economy lodging model popularized by Airbnb. Airbnb just began collecting occupancy tax in its home city of San Francisco in October. This followed the city’s passage last year of compromise legislation both legalizing short-term rentals of residential property and requiring that Airbnb and like businesses collect and remit the city’s occupancy tax. In a similar effort to capture revenue from this lodging model, and following a 2012 loss against Expedia, Philadelphia has enacted an ordinance permitting (but not requiring) booking agents such as Airbnb to collect the city’s occupancy tax on behalf of peer-to-peer hosts. Just in time for Pope Francis’s visit to the city this fall, the ordinance, effective July 1, also requires those booking agents that do not collect the tax to file quarterly information reports on hosts listing accommodations with them. 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What other property could consumers be renting out for extra money?

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