A recent article brings to light a potential change in tax policy for those that use AirBnB or similar platforms that offer short term rental agreements through electronic means. This change could involve extending the County’s 7% hotel occupancy tax to short term rentals that occur in people’s homes and don’t fit the traditional mold of a hotel, motel, or bed and breakfast. Up to this point the tax has not been applied to those renting out space in their home.
But according to the solicitor for the County Treasurer’s office, which is responsible for collecting the tax, “…AirBnB rentals absolutely are taxable”. Across the state Philadelphia altered its hotel tax policy on July 1st of this year in response to rentals that may occur during a visit from the pope in two months.
So what would extending the hotel tax to AirBnB rentals in Allegheny County mean in the short- and long-term? Immediately it would mean that those renting out rooms or space for a duration of less than 30 days that they would owe 7% of their income derived from such activity to the County. This means that someone renting a room for $100 would pocket $93 unless they raise their asking price to maintain the $100 before tax amount. It is unclear if the renter would have to withhold the tax or if the electronic platforms would withhold the tax. AirBnB has agreements in thirteen localities to act as the collector of the tax.
Long-term, positives and negatives could occur from this change. A positive for those groups that partake of the tax revenue is that there would likely be more revenue from what amounts to an expansion of the activity subject to the tax. A possible negative could be that higher prices might dissuade some from utilizing this emerging technology. And this goes without speaking to determining whether those offering rentals through an electronic app or platform have to comply with zoning, health, and building codes which are set at the municipal level in the County. And that is not just a cost of compliance to the people offering space up for consideration, but the municipalities that will have to police the presence of such rentals if they are commercial in nature.
