Extras on Excise: Philadelphia Anticipates More Tax Revenue from Short-Term Rentals When Pope Visits

Tourists who are planning on using Airbnb as an alternative to fully booked hotel accommodations to see the Pope during his September 26th visit are in for a surprise. Currently, the average room for rent on the room sharing service, Airbnb, for the weekend of the Papal visit is $764, with some as high as $4,000. Bloomberg BNA’s Leslie Pappas noted in a Weekly State Tax Report in a May story about Airbnb, that Philly is expecting another influx of crowds next year for the Democratic Convention. However, this is not the only upgrade in pricing that visitors will encounter. 

On July 15, the City of Brotherly Love started collecting an 8.5 percent occupancy tax from websites like Airbnb for offering limited lodging arrangements within Philadelphia through their online service. The Philadelphia City Council passed Bill No. 150441-A to legalize short-term rentals and clarify situations where short-term rentals are facilitated through booking agent websites. Previously, such arrangements in residential living units were illegal. 

The bill was amended to define a limited lodging as providing accommodations for fewer than 91 days per year and no more than 30 consecutive days per visitor. Any rental lasting more than 30 days requires a permit. Arrangements for less than 30 days are exempt from needing a rental license, so long as the activity is compliant with the zoning code and the primary resident is the owner of the dwelling unit. It also stipulates that the owner of the unit, not the booking agent, is considered the person collecting rent, regardless of whether a booking agent, such as Airbnb, does it on behalf of the owner. 

Although Airbnb does not collect hotel or occupancy taxes everywhere, many jurisdictions are starting to regulate the room-sharing service industry and require taxes be collected on behalf of the jurisdiction. Airbnb is already collecting taxes on behalf of places such as North Carolina, Austin, South Carolina, Portland, San Francisco, San Jose, Chicago, Washington, D.C. and Malibu, just to name a few.

In the next few years more states are likely to regulate short-term rentals and require occupancy tax payments from people who provide accommodations through room sharing services. 

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: What are some pros and cons of regulating short-term rentals and charging occupancy taxes?

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