Report: SCOTUS Ruling Makes Airbnb’s Tax Agreements Obsolete

The American Hotel and Lodging Association (AHLA) this week released a report, authored by former Director of the Montana Revenue Department Dan Bucks, claiming that last year’s Supreme Court’s Wayfair vs. South Dakota decision eliminates the need for state and localities to enter into “voluntary collection agreements” (VCAs) with Airbnb and provides the legal framework and incentive to tax Airbnb like other online businesses.

State and local governments across the country have entered into VCAs as a way to facilitate the collection and remittance of transient occupancy taxes from Airbnb users and hosts. These agreements largely allow Airbnb to keep information on individual hosts to itself — which some critics say makes it impossible for governments to know where short-term rentals are located or whether Airbnb is remitting the correct amount of tax.

According to a press release:

“Airbnb no longer qualifies—if it ever did—for privileged treatment by tax agencies as a ‘voluntary collector,’” states Bucks in the report.  “This treatment gives Airbnb an unfair advantage in the marketplace by creating a tax and regulatory haven for Airbnb lodging operators.  Post-Wayfair, Airbnb’s “voluntary agreements” are now a relic of a past legal premise that no longer exists.”

Bucks urges government leaders to begin the process of terminating existing “voluntary” tax agreements with Airbnb in coordination with state adoption of “general marketplace provider” legislation. Bucks went on to say that disparities between the tax treatment of Airbnb and other online businesses pose a legal risk to states and localities.

The report released on behalf of AHLA calls on state and local government leaders to reject Airbnb’s future pursuit of voluntary collection agreements (VCAs) and look to the Wayfair decision as a pathway to cancel current VCA agreements and bring Airbnb up to code with current industry tax standards and regulations.

“Airbnb has been making back-room deals and strong-arming state and local jurisdictions into ‘voluntary’ tax deals with no transparency, oversight or auditing capability for years,” stated Chip Rogers, President and CEO at AHLA.  “Airbnb, and other short term rental platforms need to abide by the same rules as all other law-abiding, tax-paying businesses in the industry.”

“Airbnb’s secret tax agreements are hurting communities across America by shortchanging their schools, infrastructure, and other public services” stated Rogers.  “Airbnb’s special treatment needs to end.”

As previously reported on Conduit Street, the US Supreme Court last year struck down a longstanding rule preventing states from imposing their sales taxes on sellers who do not have a physical presence in that state.

South Dakota v. Wayfair, Inc. represents a stark turnaround from longstanding federal policy precluding state enforcement of sales taxes on sellers without a “nexus” (typically a physical presence such as a retail location) within that state. The decision, long sought by state and local governments, could promote far broader application of sales taxes, and remove a lingering tax inequity between local and remote sales.

Useful Links

Previous Conduit Street Coverage: SCOTUS Opens Door To State Taxation of Internet, “Remote” Sales

Report: Airbnb’s Tax Agreements Are Obsolete