Last month, Chris Lehane, AirBnB’s head of global policy, showed up at United States Conference of Mayors and told the hundreds of heads of municipal government that if they passed new tax laws on vacation rentals, AirBnB would collect them. “Read my lips: we want to pay taxes,” Lehane told them.
In fact, AirBnB is already collecting taxes on behalf of several jurisdictions around the world including Amsterdam, Chamonix, Washington DC, Florida, Chicago and others.
The tax issue is one of the concerns that have been raised throughout B.C. regarding the explosion of short-term rentals.
“The issue is that there aren’t the appropriate regulatory and taxation frameworks in place to deal with it,” said Ty Speers, the president of Tourism Vancouver.
In Revelstoke, hotel guests are charged an extra two per cent tax and the money goes into tourism promotion. The tax doesn’t apply to most vacation rentals, or other small accommodations like bed and breakfasts.
In Revelstoke, there is a sense that vacation rentals benefit from tourism marketing efforts, yet they don’t pay into it.
“The major problem is the disparity in coming and staying at a hotel – what a guest will give back to Revelstoke – versus staying at a vacation rental,” said Scott Duke, a city councillor who owns a vacation rental and runs a company that manages 15 others.
(Editor’s note: Duke’s comments were made before he was forced to withdraw a second vacation rental application due to a conflict-of-interest violation that resulted from speaking to the Review. See page four for that story.)
B.C. accommodation providers who offer fewer than four units are exempt from the PST and the hotel tax, wrote a spokesperson for the Ministry of Finance in response to questions. “This recognizes the importance of smaller operators like bed and breakfasts to community tourism.”
The spokesperson clarified the rules: A four-bedroom vacation rental that is rented as a whole doesn’t have to charge the tax, but if the rooms were rented separately, the tax would have to be charged. Someone that owns four separate vacation rentals would have to collect the tax.
The spokesperson wrote the government had no plans to change the policy.
There is a push to start levying the tax on vacation rentals. Tourism Vancouver announced last fall they would begin exploring the option, and AirBnB says they are willing to collect the tax. In B.C., the Ministry of Finance grants taxation powers, and right now municipalities don’t have the ability to levy their own hotel tax.
“The right thing is to get a regulatory framework and a taxation framework that deals with the AirBnBs of the world,” said Speers. “It’s early days, but it’s in discussion. It’s now at least out there and everybody that needs to be talking about it is talking about it.”
The City of Revelstoke doesn’t have the ability to tax vacation rentals, and they don’t have the power to assess properties as commercial instead of residential — that is up to BC Assessment.
A report on vacation rental policy that was prepared for Sun Peaks by Dan Wilson, a community planning specialist with the Whistler Centre for Sustainability, made several recommendations to “tax” vacation rentals. The first was to ensure that commercial fees were paid to Tourism Sun Peaks. The second was for Tourism Sun Peaks to set a fee structure for ski chalets. The third was for the municipality to advocate for voluntary payment of the hotel tax. He also recommended the municipality lobby the province to revisit its taxation policy.
The tax issue extends beyond the hotel tax. The Revelstoke Accommodation Association has gone to council asking them to actively pursue illegal rentals. One of their arguments is that the city is losing out on revenue from business license fees by not cracking down on illegal rentals. In a letter to council in July, RAA wrote the city could be losing out on $12,000 to $20,000 in fees and $16,000 to $32,000 in fines.
I spoke to one illegal vacation rental owner (who asked to not be identified) in town. She said she’d considered becoming legal, but decided not to because of the fee to apply.
“The hard part for us is we make a few dollars through the winter, but we don’t make super great money,” she said. “If you made really good money and you were steady booked through the whole winter, that would be different.”
Duke said the application fee of $1,800 was a barrier for some of the owners he worked with, though he himself didn’t think it was too high.
“I just think it’s a lot of money upfront for somebody to pay,” he said. “It’s a barrier to entry, but once you have that, you have it and your land is designated for that forever. When you sell your property, you can sell it as a vacation rental.”
Ty Speers said they hope to present a plan to tax vacation rentals sometime this year.
“What we have said to AirBnB and to our hotel community is the hotels are obligated to collect the hotel tax,” he said. “We believe if AirBnB is in the business of providing an accommodation platform, that one way or the other – and there are lots of details to discuss – that they should be finding a way to contribute to the tourism industry in a similar fashion to the hotel tax.”
He didn’t know if that would be a tax or a different mechanism.
“If we get into discussion of a level playing the field, the discussion should include some sort of mechanism to require AirBnB to contribute to the tourism economy in a similar fashion that hotels do,” he said.
This is the final part in our series on vacation rentals. For more stories in the Development Matters series, stay tuned to the Review, Current and Mountaineer. We will continue to produce stories under this umbrella over the coming weeks and months.