WASHINGTON, DC – A new report released today on National Tax Day highlights why the Supreme Court`s wayfair decision against South Dakota eliminates the need for states and municipalities to enter into “voluntary tax treaties” with Airbnb. The report, released by Dan Bucks, former director of Montana`s revenue department and former executive director of the Multistate Tax Commission, says last year`s decision changes the legal framework and prompts Airbnb to tax now like any other U.S. online company. “Some governments have rules that require platforms like Airbnb to collect and remit taxes, and we are doing everything we can to meet those obligations,” said Christopher Nulty, airbnb`s public policy manager. However, many governments don`t have such rules, so Airbnb has proactively entered into more than 500 voluntary collection agreements around the world to ensure our community pays its fair share of taxes. We are committed to doing everything in our power to ensure that we pay our fair share and we are ready to work with any government that works with us. “Airbnb has been making deals behind the scenes for years, arming states and local jurisdictions into `voluntary` tax treaties without transparency, oversight or verifiability,” said Chip Rogers, president and CEO of AHLA. “Airbnb and other short-term rental platforms must follow the same rules as any other law-abiding, tax-paying business in the industry.” The obvious solution to collecting STR taxes is to collect them at the “point of sale”, i.e. Airbnb, VRBO, etc. to have taxes levied on sales, just like legitimate hotels or retail stores. But online platforms refused to take responsibility for collecting taxes because they are “just a booking service” and the taxes were owed by STR operators and not Airbnb.
“Airbnb no longer qualifies — if it ever did — for preferential treatment by tax authorities as a `voluntary collector,`” Bucks said in the report. This treatment gives Airbnb an unfair advantage in the market by creating a tax and regulatory haven for Airbnb real estate operators. According to Wayfair, Airbnb`s “voluntary agreements” are now a relic of an earlier legal premise that no longer exists. In the past, other online rental services such as Booking.com, HomeAway, and VRBO did not collect these taxes in many places. Over the past couple of years, HomeAway and VRBO have started levying occupancy taxes in a handful of areas – sometimes with their own version of a VCA. Booking.com does not provide occupancy tax collection services, which further increases revenue outflows for municipalities. Booking.com global Communications Manager, Kim Soward, says the company pays all necessary taxes. Expedia Group — owners of HomeAway, VRBO, VacationRentals and other websites — did not respond to several requests for comment.
In areas where Airbnb has agreements with governments to collect and transfer local taxes on behalf of hosts, Airbnb calculates those taxes and collects them from guests at the time of booking. Airbnb then transfers the collected taxes to the appropriate tax authority on behalf of the hosts. Learn more about how Airbnb collects and transfers occupancy taxes. The report, released on behalf of the AHLA, urges state and local politicians to reject Airbnb`s future pursuit of Voluntary Collection Agreements (VCA) and to view the Wayfair decision as a way to end current VCA agreements and align Airbnb with current industry tax standards and regulations. However, these agreements do not require hosts to comply with other zoning, health and safety rules, and they prohibit cities from trying to raise taxes. Some also create barriers for local authorities to identify and monitor hosts who register on the website. Dan Bucks, former director of the Montana Department of Revenue and former executive director of the U.S. Multistate Tax Commission, analyzed some of the few publicly available Airbnb deals and found that most city officials prevented them from knowing the names or addresses of Airbnb hosts, making it impossible for officials to enforce local codes. Bucks says the deals helped Airbnb grow by providing hosts with “a shield of secrecy.” His study was funded in part by the American Hotel and Lodging Association, which often contradicts Airbnb and other short-term owners. Airbnb says its CAVs are designed to help government agencies collect tax revenue, not to help them enforce other laws related to short-term rentals. The company says the agreements show it is a responsible corporate citizen.
Soon after, Gannon asked to see the details of the deal; State officials told him it was confidential. So she sued the Florida Department of Revenue, claiming the agency`s secrecy violated the state`s public records law. A few hours later, the ministry faxed a copy of its Airbnb VCA to Gannon`s office; She says she was asked not to share it with anyone. It required Airbnb to only provide aggregated data to the state and allowed the company to retain “all personally identifiable information” about hosts or guests. Most other CAVs signed with state or local governments contain identical language. In January 2018, the Tennessee Department of Revenue signed a VCA with Airbnb. The deal requires Airbnb to collect and pay the state`s 7 percent sales tax on its reservations, but doesn`t cover the 5 percent occupancy tax in Nashville, by far the state`s largest market. A few days later, Nashville passed its ordinance banning mini-hotels. AHLA calls on state and local politicians to end Airbnb`s voluntary tax treaties and instead introduce a tax policy that collects taxes from Airbnb and its operators to ensure a level playing field and transparency for taxpayers. In San Francisco, home of Airbnb`s headquarters, the company agreed to refund taxes and collect municipal taxes from its hosts. The AHLA calls on other states and places to do the same.
That changed around 2014, when Airbnb began doing business with officials in certain cities to collect and deliver taxes from its hosts. These are called voluntary collection agreements, or VCA. .