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Airbnb’s growth pits hoteliers against homeowners

Anne Wallace AllenNew hotels are rising in Idaho cities, in some cases for the first time in decades. Meanwhile, another lodging-related issue is also bubbling close to the surface: How to handle Airbnb and other sites that allow homeowners to rent rooms and pay tax on the honor system.

Idaho requires operators of hotels, motels, campgrounds, and vacation homes to charge a 2 percent lodging tax, along with the 6 percent sales tax. The 2 percent goes for travel and tourism marketing in Idaho.

The Airbnb website, which started in 2008, enables homeowners to rent space in their homes, their yurts, and a variety of other domiciles to guests. Airbnb hosts must pay the lodging tax. In Idaho, some pay it and some don’t. Like other very small businesses, they’re on the honor system.

Owners of established Idaho lodging say enforcement is lacking, and that puts them at a disadvantage. The Idaho Lodging and Restaurant Association, the industry’s lobbying group, tried to tackle the problem last year in the Legislature with a proposal to strengthen the existing law. But Pam Eaton, the group’s executive director, said in the end lawmakers were convinced the existing law didn’t need to be changed – just the enforcement.

The Tax Commission says it does everything it can to track down tax-avoiders in every industry, including Airbnb. Idaho lodging owners say they’ve checked on their own, have asked Airbnb hosts, and have been told by their own guests that not all Airbnb hosts charge the lodging tax.

Eaton’s group and the Idaho Bed and Breakfast Association believe the Tax Commission would make back for the state in lodging taxes what they would spend in enforcement. And it would level the playing fields for hosts of all sizes.

“They should have the same regulations, and inspections, and licenses and restrictions and taxes that we have to live with,” said Kathy Pidgeon, the general manager of the Riverside Hotel in Garden City, who noted that the Riverside also pays an additional 5 percent tax because it’s part of the auditorium district.

Renee Eymann, a public information officer with the Idaho State Tax Commission, said the Tax Commission uses a combination of audit and education to collect from all taxpayers, including Airbnb hosts.

“We’re doing everything we can to find those folks who aren’t complying with the law, and trying to bring them back into compliance,” she said.

While they’re asking for more enforcement, hotel groups are also aiming for education and advocacy. The Lodging and Restaurant Association, which has about 400 members, recently joined up with the Treasure Valley Lodging Association, which has about 50, to share Eaton’s advocacy expertise. They didn’t join up to tackle the Airbnb situation, Eaton said, but it’s one of their larger priorities.

Eaton noted that under the existing system, only the hoteliers and others who pay the rooms tax are supporting the travel and tourism promotion that assists the Airbnb operators in drawing Idaho guests.

“Hoteliers shouldn’t have to pay for the entire thing when there’s another entity taking advantage of that,” she said.

Brian and Shar Scott, who run a Coeur d’Alene B&B and the state Bed and Breakfast Association, said they get complaints from their members about Airbnb and taxes all the time.

“We don’t want to punish them, we just want to bring them into the fold,” said Brian Scott.

Brian Scott said he thinks Airbnb and similar sites fill an important need for short-term home rentals, so families and groups can stay in the same place, with a kitchen. But he also thinks Airbnb and its ilk, such as VRBO, have helped lodging amateurs cut into Coeur d’Alene’s hotel business.

“Businesses that used to be full for huge events, like the Ironman – as soon as VRBOs became popular, we noticed throughout our industry that lodging was way down,” he said. “We used to be able to fill up six to eight months in advance with athletes and now most of our lodging partners are lucky to get two or three athletes or any at all. The athletes are all leaning toward renting a place where they can throw eight to 10 people in a house and share the rent.”

Brian and Shar Scott have talked to the Tax Commission too, but they said the Tax Commission asked them to tell them if they came across Airbnb hosts who weren’t paying the tax, so the commission could contact them. The two balked at that.

“We don’t want to be tattletales,” Brian Scott said.

They’ve also created a presentation and asked the Idaho Travel Council, local Chambers of Commerce, realtors and other business groups to educate new Airbnb operators about things like fire extinguishers and liability insurance, along with taxes. That idea hasn’t taken off, the two acknowledged.

Some cities, such as San Francisco, New York, and Chicago, have had some success in court getting Airbnb to follow local lodging laws. But Brian Scott thinks tiny Coeur d’Alene probably wouldn’t prevail against huge Airbnb, which now has an estimated 1.5 million listings, in court.

“You couldn’t say, ‘We’re Coeur d’Alene, and we want you guys to modify your contract so the taxes are paid to us,” he said. “They’d probably just laugh.”

However, all is not lost. Traditional B&Bs in Idaho have themselves started advertising their rooms on Airbnb, alongside the suburban bedrooms, lake houses, sheepherders’ carts, log cabins, and mountain idylls that make up the state’s interesting Airbnb offerings.

“Somebody had a great idea. It’s a great format; God bless them; it’s America,” said Brian Scott. “But there are severe loopholes in there. It’s about leveling the playing field.”

Anne Wallace Allen is editor of the Idaho Business Review.

About Anne Wallace Allen

Anne Wallace Allen is the editor of the Idaho Business Review.