by James A. Bacon
The fracas in Virginia over Uber and Lyft has settled down. The two “transportation network companies” have submitted to regulation requiring background and safety checks of drivers, and nearly 19,000 vehicles have registered with the state, according to the Richmond Times-Dispatch. The next legal front in the sharing economy is likely to focus on Airbnb, the company that enables individuals to rent out houses, rooms and apartments for short-term lodging.
The problem, according to the Commonwealth Institute, is that Airbnb does not collect and remit the lodging taxes on these rentals, meaning that local governments could be losing millions of dollars in tax revenue.
Thousands of Virginians have signed up on Airbnb to offer accommodations to paying visitors. A check this morning showed 692 rentals being offered in the City of Richmond as the UCI Road World Cycling Championships approaches, 288 rentals in beach destination Virginia Beach, 489 rentals in the college town of Charlottesville and more than 1,000 rentals each in Fairfax County, Arlington County and Alexandria near the nation’s capital. Charges can vary from $37 per night for a “very, very rustic cabin by the river” in Hinton… to $225 per night for a three-bedroom house in Blacksburg during football weekends… to $2,000 per night for a three-bedroom house in Old Town Alexandria.
The state requires hotels, motels and campgrounds to collect a sales tax of 5.3% to 6% for reservations of less than 90 days. Many localities also collect a local occupancy tax, which in the case of Richmond, Henrico, Hanover and Chesterfield amounts to 8% to cover debt from building the Greater Richmond Convention Center. Other communities use the occupancy tax to support local convention and visitors bureaus (CVBs) and tourism initiatives.
Airbnb is not collecting taxes in Virginia. According to the Commonwealth Institute, the company suggests that renters charge and remit occupancy taxes on their own. But the taxes can be confusing for casual Airbnb hosts to understand and localities are not set up to monitor and enforce collections on casual rentals.
Earlier this year, however, Airbnb reached an agreement with Washington, D.C., to collect and remit occupancy taxes on all of its rentals in the District. That follows agreements in Portland, San Francisco and Wake County (Raleigh, N.C.) to do the same.
Bacon’s bottom line: I can see why the hospitality industry is up in arms over Airbnb. Airbnb rentals under-price hotels and motels offering comparable accommodations but they don’t contribute to the collective efforts of CVBs to market and promote their metropolitan region as a destination. Forcing casual renters to handle the paperwork would be a deal breaker for many, but Airbnb’s administrative systems should be able to execute the task of remitting taxes with little difficulty. I agree with the Commonwealth Institute that the Commonwealth of Virginia and its localities should seek the same kind of tax-collection deal that North Carolina and several of its jurisdictions have struck with the company. Create a level playing field and may the best competitors win!
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