Marin’s representative in the state Senate is proposing legislation that would create a statewide system for collecting transient occupancy tax from vacation rentals.
“Hundreds of cities and counties don’t collect bed taxes from short-term vacation rentals, and this is a simple statewide solution,” said Sen. Mike McGuire, D-Healdsburg.
Counties and municipalities would be required to opt in to the program by enacting a local ordinance. Any jurisdiction wishing to continue with its own collection programs would be allowed to do so.
Across the U.S., states are missing out on $20.75 million annually from uncollected TOT for short-term rentals, according to an estimate for the median U.S. state by Dan Bucks, former executive director of the Multistate Tax Commission. The figure is expected to be higher in California because of its status as a major tourism destination.
By some reports, there were 1.8 million short-term rental listings in the United States in 2018, and California’s 235,000 short-term rental listings are the second most in the nation.
McGuire’s proposal, Senate Bill 555, “could provide local agencies a central method for collecting TOT from all online platforms more readily,” said Roy Given, Marin County’s finance director.
However, Given has a couple of concerns about the bill. First, he objects to the fact that, as proposed, the cost of the program would be paid for by cities and counties rather than the online platforms.
The bill states that participants in the program would be required to pay their proportionate share of the collection and administrative costs. It provides no estimate on how much that might amount to.
Second, Given said, “It is important that the county’s existing collection agreements with Airbnb and VRBO are preserved.”
For several years, Given’s office has been working with counties across California to create standard collection agreements with the vacation rental platforms. Marin County established agreements with Airbnb in 2017 and VRBO in 2020.
In the 2017-18 fiscal year, the county’s agreement with Airbnb brought in more than $427,000 in additional TOT revenue. The following year, Airbnb paid the county more than $1.3 million in TOT.
“Airbnb collects and remits transient occupancy taxes in over 70 California jurisdictions,” Adam Thongsavat, a company executive, wrote in an email, “and we are proud to support Senator McGuire’s efforts to create a level playing field for all short-term rental platforms so cities and counties across the state can more readily collect much-needed tax revenue.”
Nadine Hade, San Rafael’s finance director, said her city began collecting TOT from short-term rental operators in January 2020 and has also negotiated an arrangement with Airbnb for the company to collect the tax from its operators.
Hade said she hasn’t evaluated whether the city could benefit from the proposed state program by reducing the administrative costs of collecting the tax.
In California, 431 cities and 54 counties levy a TOT, mostly for general revenue purposes, and they typically use the revenue to support services such as fire, police, public health, roads, parks and libraries.
It is much more difficult for local governments to collect TOT from short-term vacation rentals than from hotels. That is because local governments sometimes don’t know what properties are being used for vacation rentals, and hosts are sometimes unaware of the requirement to collect and remit the taxes.
Local agencies generally cannot force platforms to disclose which properties in their jurisdictions are being used as short-term rentals, and might be operating in violation of zoning or other local ordinances. SB 555, however, would not produce information local agencies could use to enforce local ordinances.
Both Marin County and San Rafael contract with Seattle-based Host Compliance to identify all of the short-term vacation rentals in their jurisdictions.
In August 2018, Marin County supervisors approved an ordinance to punish short-term rental operators who refuse to pay the TOT. The supervisors gave the finance director the authority to record a tax lien against the owner and manager of any short-term rental property who neglects to collect and remit the tax.
Since then, 10 liens have been filed, nine in February 2020 and one in March 2021. Two of the liens have since been resolved after the TOT was paid.
The county has 741 registered short-term rental operators. Host Compliance has identified 91 short-term operators who are not collecting the tax, and letters were sent to them on Friday putting them on notice of the tax lien consequence.
In November 2012, voters also approved a 4% increase in the TOT assessed on vacation rentals in West Marin, bumping it up to 14%. Half of the revenue from the tax increase is earmarked for enhanced fire and emergency services in West Marin. The other half is reserved to support long-term community housing in West Marin.
Following the tighter enforcement of TOT collection, the West Marin increase in the tax, and the county’s agreements with Airbnb and VRBO, the county TOT revenue rose steadily from more than $3.3 million in the 2016-17 fiscal year to more than $5.7 million in fiscal year 2019-20.
Revenue in 2019-20 increased despite the fact that collections in April, May and June of that year were drastically lower than the final three months of the prior fiscal year because of the COVID-19 pandemic. For example, the TOT brought in about $44,000 in May 2020 compared to more than $479,000 in May 2019.
Marin County’s TOT revenue has been growing monthly since July 2020. In February 2021, it amounted to more than $369,000, compared with over $463,000 in February 2020.
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Marin’s state senator aims to boost tax yield on vacation rentals - Marin Independent Journal
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