State and local governments should end their special tax deals with Airbnb and begin taxing them like other online U.S. businesses, according to a new report released on behalf of the American Hotel & Lodging Association. Report author Dan Bucks, the former director of the Montana Revenue Department and former executive director of the Multistate Tax Commission, cited the U.S. Supreme Court’s 2018 South Dakota v. Wayfair decision, which overturned a 1992 ruling that had barred states from collecting sales taxes unless a business has a physical presence in that state.
As a result of the decision, states now can pass laws requiring online retailers to collect state sales tax. More than half of states have already passed such laws, most setting a threshold of $100,000 in revenue or 200 in-state transactions, after which remote sellers must collect sales tax.
In his report, Bucks argued that the voluntary tax agreements Airbnb has made with states and local governments has given it “more favorable treatment than other lodging operators and taxpayers generally, thus facilitating Airbnb’s growth in market share.” With the Supreme Court decision, he said, “Airbnb no longer qualifies—if it ever did—for privileged treatment by tax agencies as a ‘voluntary collector.’”
Bucks suggested state and local governments remedy the situation by ending the special tax deals and “requiring Airbnb—as an electronic marketplace that facilitates local commerce within a state—to collect state and local sales or lodging taxes in a proper way.” He also suggested states establish a registry of local operators and require owners of lodging facilities provide, for income tax compliance purposes, 1099 reports of earnings exceeding $600.
The five-page report additionally argued the voluntary tax agreements were flawed before the Supreme Court ruling. By paying for local photography of rental properties and acting as an agent of local hosts, Airbnb already had a physical presence in the states it operated, Bucks said. Also, since a local lodging operator is supplying a good to be consumed locally, he argued the service should still be considered local commerce.
In February, the Asian American Hotel Owners Associations challenged one of these voluntary tax agreements in Florida by filing a petition with the Division of Administrative Hearings. “While traditional lodging providers adhere to strict tax collection and remittance laws, the [voluntary collection agreement] essentially allows Airbnb to operate under their honor system with no way to verify whether they are collecting and remitting all applicable taxes,” Rachel Humphrey, AAHOA’s interim president and CEO, said in a statement.
Ben Breit, spokesperson for Airbnb, defended the company, saying it had worked with the state’s Department of Revenue “to collect and remit $62.5 million in state sales revenue in 2018” and calling the petition “nothing more than a publicity stunt.”
Airbnb has also been in the news lately in New York. New rules proposed last week would affect New York City listings, banning short-term rentals in affordable housing or rent-stabilized units and limiting city residents to listing one property. The legislation, backed by Airbnb, would overrule New York City’s stricter laws and has been met with resistance by hotel and affordable housing groups.