Senate set to tax Airbnb
Lawmakers eye the tax extension to level the field; say the industry supports it
THE SENATE WILL take up a proposal to extend the hotel tax to home-sharing apps such as Airbnb and Homeaway, the latest effort to rein in and reap revenue from the wildly popular technologies driving the so-called sharing economy.
Sen. Michael Rodrigues of Westport says the measure merely “closes a loophole” that allowed the apps to operate as rentals but not pay the state’s room tax like traditional hotels, motels, and bed and breakfasts do.
“We heard from a number of cities and towns, primarily communities down the Cape, that wanted to be able to collect their local rule occupancy taxes,” said Rodrigues, the chairman of the Joint Committee on Revenue and a chief proponent of the bill. “This is very similar to the Uber-taxi debate, this industry called room-sharing. These are industries and concepts that were not around when the tax laws were passed.”
The apps work by allowing people with rooms, apartments, or houses to offer their homes via a website or smartphone app to visitors looking for short-term rentals at lower costs than hotels, much the way private drivers use their own cars to pick up passengers through Uber and Lyft instead of riders hailing a cab.
“We worked with the industry for the last year on this,” Rodrigues said. “Airbnb and the others are in complete support of what we are doing. They’re all fairly new companies. They want to be legitimatized. It’s an industry millennials certainly are aware of but they want to go beyond that.”
The measure has been written into an economic development bill passed by the House, which did not include the hotel tax. The money is earmarked to pay for a boost in the Earned Income Tax Credit, which was also added by the Senate, hiking it from 23 to 28 percent for more than 415,000 low-income families.
Rodrigues said estimates from the Department of Revenue indicate the change in the hotel tax would bring in an estimated $13 million to $20 million a year to the state and a similar amount to cities and towns that have the local option tax, but he said he thinks the popularity of the service will make the haul bigger from the outset.
“These apps right now are about 15 percent of market and it’s growing exponentially,” he said. “I think those numbers are grossly understated. I think it’s going to be closer to $30 million and it will grow.”
Under the Senate bill, the 5.7 percent state tax on so-called transient housing will go into effect on January 1, 2017. The increase in the earned income tax credit, which is projected to reduce revenues by $50 million in the first year, will begin a year later but the first time anyone can file for it will be with their 2018 taxes in 2019, giving the state two years to sock away the money to pay for the credit.“We are helping to lift hundreds of thousands of working families out of poverty,” Senate President Stan Rosenberg said in a statement. “The Earned Income Tax Credit is one of the most powerful tools we have to grow the economy. Heads of households will put $300 more a year in their pockets, and be able to better provide for their families.”
The full Senate will take up the economic development bill on Thursday and assuming it passes, it will then go to a conference committee to work out the differences with the House version. House officials, who were caught off-guard by Senate’s inclusion of the home-sharing tax, had no immediate comment, saying they were waiting to see what the final Senate bill looks like so they could compare it to the House version.