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HomeMy WebLinkAboutItem 08 Collection of Transient Room Taxes from Booking Agents for Short Term Rentals AGENDA ITEM SUMMARY Meeting Date: 9/19/2016 Meeting Type: Regular Meeting Staff Contact/Dept.: Courtney Griesel/CMO Kristina Kraaz, CAO Staff Phone No: 541.726.3740 Estimated Time: 5 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Financially Responsible and Stable Government Services ITEM TITLE: COLLECTION OF TRANSIENT ROOM TAXES FROM BOOKING AGENTS FOR SHORT-TERM RENTALS ACTION REQUESTED: Conduct a public hearing and first reading on the following ordinance: AN ORDINANCE AMENDING THE SPRINGFIELD MUNICIPAL CODE SECTIONS 7.700, 7.706, 7.708, and 7.726 TO ADD DEFINITIONS AND CLARIFY DUTIES OF BOOKING AGENTS AND HOSTS OF SHORT TERM RENTAL LOCATIONS (FIRST READING) ISSUE STATEMENT: The City of Springfield, through a voluntary agreement has authorized the City of Eugene to collect and distribute transient room taxes (TRT) received from overnight stays booked through the internet-based platform, Airbnb, Inc. Collection of TRT through Airbnb requires amendment to Springfield Municipal Code (SMC) Chapter 7 to clarify that booking agents and hosts of short-term rentals are subject to the TRT. Under the agreement with Airbnb, collection of TRT begins October 1, 2016. ATTACHMENTS: Attachment 1: Council Briefing Memorandum Attachment 2: Proposed Ordinance Attachment 3: Voluntary Collection Agreement for Eugene, Lane County, Springfield, Florence, and Cottage Grove Transient Room Tax DISCUSSION/ FINANCIAL IMPACT: Please see the attached Council Briefing Memorandum. M E M O R A N D U M City of Springfield Date: September 13, 2016 COUNCIL BRIEFING MEMORANDUM To: Anette Spickard, Acting CMO From: Courtney Griesel/CMO Kristina Kraaz, CAO Subject: Collection of Transient Room Taxes from Booking Agents for Short-Term Rentals ISSUE AND BACKGROUND: The City of Springfield, through SMC Sections 7.700 through 7.738, receives transient room tax (TRT) funds generated by overnight hotel stays within the Springfield city limits. Each hotel operator is required to collect the taxes from the occupant of the room. These funds are collected, through an existing agreement, by the City of Eugene and distributed to taxing jurisdictions as specified in the agreement. In the last decade, Airbnb has become a leader in the tourism industry, providing a platform through which third parties may offer accommodations to guests. These accommodations are often located at non-commercial properties, such as private residences. Many, if not all, Airbnb hosts are required to collect and remit TRT taxes under the current code. However, few hosts apparently comply with these requirements, likely due to any of the following reasons: the current system for TRT collection was developed for hotel owners and not homeowners, the taxes are collected by a different jurisdiction, and neither Springfield nor Eugene have engaged in any significant public outreach educate these relatively-new Airbnb “hosts” about the obligation to collect and remit TRT. In an effort to assist its hosts with complying with local occupancy tax requirements, Airbnb has been entering into voluntary collection agreements with taxing jurisdictions across the country to collect and remit these taxes. The City of Springfield, along with Eugene, Lane County, Florence, and Cottage Grove, recently entered into a Voluntary Collection Agreement with and Airbnb, Inc. to facilitate the reporting, collection and remittance of applicable TRT incurred from Airbnb facilitated overnight stays. The proposed code amendments are intended to modernize the TRT code and to clarify the obligations of booking agents and hosts for collection and remittance of TRT. Voluntary Collection Agreement with Airbnb This summer, the City of Eugene worked with Airbnb to negotiate terms of a voluntary collection agreement whereby Airbnb collects TRT for overnight stays that it facilitates within the City of Eugene and remits the taxes to Eugene. Because the City of Eugene acts as the TRT administrator for Springfield, Cottage Grove, Florence, and Lane County, Eugene reached out to the other taxing jurisdictions to include them as parties to the agreement with Airbnb. Springfield staff reviewed a draft of the agreement at the beginning of September. The agreement was executed by all the jurisdictions on or before September 8 due to the amount of time needed for Airbnb to make changes to its system to begin collecting TRT on the proposed date of October 1. The Voluntary Collection Agreement allows Airbnb to collect the TRT taxes on behalf of its hosts, and includes a provision allowing the City of Eugene to routinely audit Airbnb every four years (covering up to one 12-month period). The agreement does not allow the taxing jurisdictions to individually audit any hosts, unless the audit of Airbnb reveals noncompliance with the tax code or the Voluntary Collection Agreement. Collection of TRT from Airbnb will generate a positive financial outcome for the Springfield Attachment 1, Page 1 of 2 TRT fund, although it is not yet known how significant of an increase. The division of funds to each jurisdiction will be proportionate to the number of Airbnb bookings in each jurisdiction. The City of Springfield will see first revenues from Airbnb overnight stays in December 2016. Proposed TRT code amendments The current TRT code was drafted with online booking agents for private residences in mind. For that reason, staff recommends amending the City’s TRT code to clarify the obligations of booking agents and hosts for collecting and remitting TRT. Specifically, staff recommends the following: amending Section 7.700 to define a “booking agent,” “host” and “short-term rental” and to provide additional clarity to the meaning of “hotel”; amending Section 7.706, which defines hotel operators’ duties to collect and remit TRT, to enable and require booking agents to collect and remit TRT on behalf of hosts; and amending Section 7.726 to allow booking agents who collect TRT to withhold a portion of the tax to offset their administrative costs. Staff also recommend amending Section 7.708(4), which currently exempts an owner of a private home, vacation rental, cabin, or similar facility from paying TRT taxes if they rent the facility “incidentally to his or her own use.” Based on an informal survey of Springfield properties currently offered for rent on Airbnb, it appears that the vast majority of current hosts offer their homes or portions of their homes (typically spare rooms, mother-in-law suites, or accessory dwelling units) for rent on a regular and continuous basis, which staff believes is not merely incidental to their own use. However, some hosts may believe, mistakenly or otherwise, that they are not subject to TRT taxes under this exception merely because they continue to occupy their home as a primary residence. Staff therefore recommends amending SMC 7.708(4) to state that the exception applies only when a facility is rented for less than seven calendar days per year and is not advertised or marketed to the public (i.e. through a booking agent like Airbnb). The intent of the proposed amendment is not to impose new taxes on homeowners who would currently be exempt from TRT; rather, the intent is to provide better clarity for current and future short-term rental hosts regarding the obligation to collect and remit TRT. Gap between effective dates Under the Voluntary Collection Agreement, Airbnb will begin collecting the applicable TRT taxes (county and/or city) for all transactions on its platform within Lane County on October 1, 2016. The earliest that the proposed ordinance would become effective is 30 days after the second reading on October 3 if the Council decides to move forward. Thus, there is potentially a one-month period of time during which Airbnb will collect TRT under the current TRT code. It is unlikely that the gap between effective dates will have any significant impact on the City of Springfield. The current TRT code generally does apply to Airbnb hosts within Springfield, although compliance with the tax code has been minimal due to the difficulty of identifying Airbnb hosts to enforce the code or to provide educational outreach. Without further amendment to the code, the City of Springfield lacks strong enforcement authority against Airbnb the Voluntary Collection Agreement is terminated; the City would have enforcement authority against individual hosts, but enforcement against hosts is problematic given the difficulty in identifying hosts by name or address. In addition, there could be confusion among individual Airbnb hosts whether they should be exempt from Airbnb’s collection of the TRT, and therefore may result in more appeals to the City Manager for a refund under SMC 7.730. COUNCIL GOALS/MANDATE: Financially Responsible and Stable Government Services RECOMMENDED ACTION: Conduct a public hearing and first reading of the proposed ordinance. Attachment 1, Page 2 of 2 CITY OF SPRINGFIELD, OREGON ORDINANCE NO. ___________ (EMERGENCY) AN ORDINANCE AMENDING THE SPRINGFIELD MUNICIPAL CODE SECTIONS 7.700, 7.706, 7.708, and 7.726 TO ADD DEFINITIONS AND CLARIFY DUTIES OF BOOKING AGENTS AND HOSTS OF SHORT TERM RENTAL LOCATIONS WHEREAS, online booking agents that facilitate transactions between individual property owners (“hosts”) and people seeking short-term accommodations have become a major part of the travel industry within the last decade and are viewed as an alternative to traditional hotels; WHEREAS, through booking agents, hosts are offering short-term rentals within residential districts in the City of Springfield for transient occupancy and transient room taxes are not consistently being collected or remitted by these hosts under the City of Springfield’s transient room tax code, Springfield Municipal Code sections 7.700 through 7.738; WHEREAS, amendments are needed to chapter 7 of the Springfield Municipal Code in order to clarify the obligations of hosts of short-term rentals to collect and remit transient room taxes under the chapter; WHEREAS, the City of Springfield believes that, to the extent that booking agents are booking rooms for transient occupancy and accepting payments on behalf of hosts of short-term rentals, the booking agents should also collect and remit to the City transient lodging tax on behalf of their hosts; and WHEREAS, the City of Springfield has entered into a voluntary contractual agreement with Airbnb Inc., a transient lodging booking agent, whereby Airbnb collects transient room taxes for rentals booked through its online platform within the City of Springfield and remits the tax to the City of Springfield through the Transient Room Tax program operated by the City of Eugene, NOW, THEREFORE, THE COMMON COUNCIL OF THE CITY OF SPRINGFIELD ORDAINS AS FOLLOWS: Section 1. Section 7.700 of the Springfield Municipal Code is hereby amended to read: “The following words and phrases as used in sections 7.700 to 7.738 mean: Accrual Accounting. A system of accounting in which the operator enters on his or her records the rent due from a transient when the rent is earned, whether or not it is paid. Booking Agent. An Operator or any person that provides a means through which a Host may offer a Short-Term Rental for transient lodging occupancy. This service is usually, though not necessarily, provided through an online platform and generally allows a Host to advertise the Short-Term Rental through a website provided by the Booking Agent’s hosting platform and provides a means for potential users to arrange transient lodging occupancy and payment, whether the transient pays rent directly to the Host or to the Booking Agent. Booking Agents include, but are not limited to: (1) Online travel booking sites which are involved in the process of listing and booking Short-Term Rental transient lodging occupancies and handle any aspect of the resulting financial transaction; and/or (2) Online travel booking sites for Short-Term Rental transient lodging occupancy where advertisements of Short-Term Rental transient lodging occupancy rentals are displayed; and/or (3) A hosting or other online site that provides Attachment 2, Page 1 of 4 a means through which an Operator, Host or agent may offer a Short-Term Rental unit for transient lodging occupancy. Cash Accounting. A system of accounting in which the operator does not enter on his or her records the rent due from a transient until the rent is paid. Host. The owner or person who resides at the Short-Term Rental or has been designated by the owner or resident to manage the Short-Term Rental and who rents out the Short-Term Rental for transient lodging occupancy either directly or through the use of a Booking Agent. Hotel. Any structure or portion of any structure which is occupied or intended or designed for transient occupancy for 30 days or less for dwelling, lodging, or sleeping purposes, and includes any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, lodging house, rooming house, apartment house, house, duplex, condominium, multi-dwelling structure, trailer home, houseboat, public or private dormitory, fraternity, sorority, public or private club, space in a mobile home or trailer park, or similar structure or portion thereof so occupied, provided the occupancy is for less than a 30-day period. Occupancy. The use or possession, or the right to use or possession, for lodging or sleeping purposes, of any room in a hotel, or space in a mobile home or trailer park or portion thereof. Operator. The person who is proprietor of a hotel in any capacity and, where the operator performs functions through a managing agent other than an employee, the managing agent who shall have the same duties and liabilities as his or her principal. Compliance with the provisions of sections 7.700 to 7.738 by either the principal or the managing agent shall be considered to be compliance by both. Rent. The consideration charged, whether or not received by the operator, for the occupancy of space in a hotel whether or not valued in money, goods, labor, credits, property, or other consideration valued in money, without any deductions. Rent Package Plan. The consideration charged for both food and rent where a single rate is made for the total of both. The amount applicable to rent for determination of the transient room tax under section 7.702 of this code shall be the same charge made for rent when not a part of a package plan. Short-Term Rental. A house, multi-plex, apartment, condominium, houseboat, trailer or other residential dwelling where a person rents guest bedrooms for transient lodging occupancy. Generally, a Short-Term Rental is zoned as residential property. Tax. Either the tax payable by the transient, or the aggregate amount of taxes due from an operator during the period for which he or she is required to report his or her collections. Tax Administrator. The director of finance, city of Springfield. Transient. Any individual who exercises occupancy or is entitled to occupancy in a hotel for a period of less than 30 consecutive calendar days, counting portions of calendar days as full days. The day a transient checks out of the hotel shall not be included in determining the 30-day period if the transient is not charged rent for that day by the operator. Any individual so Attachment 2, Page 2 of 4 occupying space in a hotel shall be deemed to be a transient until the period of 30 days has expired, unless there is an agreement in writing between the operator and the occupant providing for a longer period of occupancy. A person who pays for lodging on a monthly basis, irrespective of the number of days in the month, shall not be deemed a transient.” Section 2. Section 7.706 of the Springfield Municipal Code is hereby amended to read: “(1) Each operator shall collect the tax imposed by section 7.702 on a transient at the same time as he or she collects rent from the transient. The amount of the tax shall be separately stated upon the operator’s records and on any receipt for the rent rendered by the operator to the transient. No operator of a hotel shall advertise that the tax or any part of the tax will be assumed or absorbed by the operator, or that it will not be added to the rent, or that, when added, any part will be refunded. (2) An Operator or Booking Agent that directly or indirectly accepts, receives or facilitates payment, including through Application Programming Interfaces (APIs) or other computerized devices where third party providers receive information about a transaction and collect funds that may or may not be transmitted to the operator, owner or other person offering a Short- Term Rental, for the transient lodging occupancy from a transient, is required to collect, report and remit transient room taxes in accordance with this Chapter.” Section 2. Section 7.708 of the Springfield Municipal Code is hereby amended to read: “No tax may be imposed upon: (1) Any occupant for more than 30 successive calendar days; (2) Any person who pays for lodging on a monthly basis, irrespective of the number of days in the month; (3) Any occupant whose rent is of a value less than $5.00; (4) Any person who rents a private home, vacation home, cabin, or like facility from any owner who rents the facility incidentally to his or her own use thereof, when the facility is rented for less than seven calendar days per year and not advertised or marketed to the public; (5) Any occupant whose rent is paid for a hospital room or to a medical clinic or foundation, convalescent home, or home for aged people; (6) Any occupant whose rent is paid by an agency, either directly or through a voucher in response to a local disaster or an emergency declared pursuant to Springfield Municipal Code section 2.808.” Section 3. Subsection 7.726 of the Springfield Municipal Code is hereby amended to read: “Every operator or booking agent liable for the collection and remittance of the tax imposed by section 7.702 of this code may withhold five percent of the net tax due to cover his expense in the collection and remittance of the tax.” Section 4. Savings Clause. Except as specifically amended herein, Sections 7.700 through 7.738 shall continue in full force and effect. Section 5. Severability Clause. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is, for any reason, held invalid or unconstitutional by a court of competent Attachment 2, Page 3 of 4 jurisdiction, such portion shall be deemed a separate, distinct and independent provision and such holding shall not affect the validity of the remaining portion hereof. ADOPTED by the Common Council of the City of Springfield this ___ day of _________, ____, by a vote of _____ for and ____ against. APPROVED by the Mayor of the City of Springfield this ______ day of __________, ____. _______________________ Mayor ATTEST: __________________________ City Recorder Attachment 2, Page 4 of 4 Attachment 3, Page 1 of 11 Attachment 3, Page 2 of 11 Attachment 3, Page 3 of 11 Attachment 3, Page 4 of 11 Attachment 3, Page 5 of 11 Attachment 3, Page 6 of 11 Attachment 3, Page 7 of 11 Attachment 3, Page 8 of 11 Attachment 3, Page 9 of 11 Attachment 3, Page 10 of 11 Attachment 3, Page 11 of 11