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Airbnb will now collect sales and travel taxes for hosts

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Tiffany Robb (above) and her husband Grant Robb began using Airbnb to rent out a room in their house in 2015. They learned earlier this year that they had to collect sales tax from guests. Airbnb changed its platform to collect taxes for hosts in Idaho Dec. 1. Photo by Pete Grady.

Airbnb will collect state sales tax, travel and convention tax and Greater Boise Auditorium District tax for short-term lodging rentals beginning Dec. 1.

The online marketplace will automatically collect applicable tax instead of leaving it up to the host of the property to collect and remit.

The Idaho State Tax Commission expects that the new agreement with Airbnb will increase the revenue the state receives from its 6 percent sales tax and 2 percent travel and convention tax. Auditors don’t yet know how much of an increase there will be, said Randy Tilley, audit administrator with the Idaho State Tax Commission.

“We anticipate more of the hosts that advertise on the platform will become compliant because Airbnb will be assisting them, but we don’t know how many transactions are going on,” Tilley said. “The way our system works, we can’t see everyone that is renting through these websites.”

The argument over taxes for online bookings has been heating up over the last few years as sites such as Airbnb have grown in popularity.

Legally, hosts renting their homes through these websites are required to collect sales tax and travel and convention tax. The Tax Commission has tried to raise awareness about tax requirements by issuing statements  reminding rental hosts that it is their duty to collect and remit tax. That has had some effect, said Grant Robb, who rents space in his house using Airbnb.

“We didn’t know there was supposed to be a Greater Boise Auditorium tax and a convention tax and all these things when we started this process,” said Robb, CEO of the analytics company Biznetyx. “The word wasn’t out to us because the communication wasn’t there. We weren’t thinking of it as a business kind of thing; we weren’t intentionally avoiding taxes.”

Idaho State Tax Commission cannot easily track how much tax is due because it doesn’t know exactly how many nights a host rented the property out, Tilley said.

Randy Tilley

Randy Tilley

Advocacy groups such as the Idaho Lodging and Restaurant Association lobbied the Legislature to make it easier for the Tax Commission to collect from rental hosts, but lawmakers decided Idaho’s tax code didn’t need to be changed, just the enforcement did.

Grant Robb questioned whether hosts renting space out of their home should be subject to these taxes at all. He said that his own low prices provide a service to the city of Boise because they allow guests to spend more money out at the restaurants and events that the Robbs direct them too.

“It’s not like going to the Grove, which theoretically is one of the better hotels downtown,” Grant Robb said. “If I was coming to Boise and I stayed in that hotel for $200 a night it wouldn’t encourage me to love Boise … It’s an old-fashioned hotel stay vs. a person that comes and stays with someone like us that can present what life in Boise is like.

“To burden us with all these extra taxes, (the city) will pay in the long run because that warm environment for people to come to Boise and get to know it won’t be as affordable,” he said. Robb and his wife Tiffany Robb charge about $50 a night for short stays in their home and $30 a night for extended stays.

The growing popularity of “peer-to-peer” lodging options worry competing business owners. Pam Eaton, executive director of the Idaho Lodging and Restaurant Association, wants to see the Idaho State Tax Commission spend more money on tax code enforcement. She said the state would raise enough money that way to pay for extra enforcement staff while leveling the playing field for rental hosts and hotel owners.

Airbnb’s decision to include tax collection in its platform is a big win for business owners, Eaton said.

Pam Eaton

Pam Eaton

“(We) hope that all vacation rental companies will follow suit,” she said. “It’s the law and we’ve been fighting for across-the-board compliance so that all lodging properties are operating on a level playing field.”

Most Idaho cities are not authorized to set a local option sales tax, but the state makes exemptions for resort towns and counties. Airbnb will not collect local sales tax, so hosts in Donnelly, Driggs, Hailey, Ketchum, Lava Hot Springs, McCall, Ponderay, Riggins, Sandpoint, Stanley, Sun Valley and Victor as well as hosts in the Idaho Falls Auditorium District and Pocatello/Chubbuck Auditorium District must collect that tax themselves.

Hosts that rent through other peer-to-peer websites such as VRBO are also required to continue collecting taxes themselves. Businesses and rental hosts can register to remit sales and travel tax through the the Tax Commission.

Officials at the Tax Commission declined to comment on whether they are working with any other peer-to-peer websites to form similar agreements.

About Benton Alexander Smith

Benton Alexander Smith is a reporter for the Idaho Business Review, covering the Idaho Legislature, new business, technology and financial services.