The Airbnb tax mystery

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Good afternoon,

One of the enduring mysteries in the effort to grab lodging tax revenues is the absence of any effort to tap short term rental revenues from Airbnb and other apps.

Local governments moved aggressively in 2018 and 2019 to get some extra bucks from hotel guests and resort home rentals citing a tax base largely limited to property levies and a flimsy claim that hotel guests make extensive use of city and county services.

After years of Wilmington being the lone city in the state with an additional room tax, legislators signed off on letting towns and counties do the same.

Most enthusiastically jumped into the tax pool, although things got complicated in Kent County after the passage of a bill that earmarked for the DE Turf outdoor sports complex.

The ensuring controversy led to the sponsor of the bill asking county government to drop the legislation in favor of introducing a general county room tax next year. The county complied.

Meanwhile, revenue from app-based rentals like VRBO and Airbnb remains untapped. Some beach towns do charge rental taxes.

The short-term rental industry has long portrayed itself as being comprised of mom and pop operators who rent out a spare room or mother in law suite. The reality is that some operators have assembled a variety of dwelling spaces and essentially operate as unregulated hotels.

Airbnb has not been shy about touting its economic impact and noted that Delaware hosts collected more than $14 million in revenue over the summer. Using the current state room tax rate, Airbnb tax collections would have totaled $1.1 million during the three-month period.

The tourist mecca of Arizona was not shy about tapping into short-term rental revenue. Legislation passed in 2017 netted $53 million in taxes that are distributed to local units of government.

An effort to put Airbnb hosts, who in some cases have an 11 percent advantage (the state and local room taxes) over hotels, is expected this year.

It would seem only fair that this increasingly popular option at the beach and elsewhere should be placed on an equal footing.

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