“I dedicated a whole house this summer to Airbnb,” a Helena Airbnb host said in May. “I think it is very good for all of us.”
I’m not so sure.
For instance, that house that’s now being rented out to travelers and businesspeople won’t be rented out to Helena residents.
These are residents that work in the city, pay taxes there, and contribute a lot to the local economy.
But they’re not as important as the itinerant crowd that the Airbnb hosts cater to.
This means there are fewer houses, apartments, or even single rooms to rent for those that actually live in the city.
And when it comes to taxes…we’re not quite sure each of the 687,000+ rooms being rented out by Airbnb hosts in Montana are in fact paying their fair share of the lodging taxes.
Lodging taxes are currently 4% for facility use (which goes to the state’s general fund) with another 3% for sales tax (which goes to special revenue funds, the largest being the Department of Commerce’s tourism promotion unit).
So this is a 7% tax that each Airbnb host is supposed to collect from the guest.
Is that happening?
The Montana Lodging and Housing Association isn’t so sure.
“There’s a lot of question marks,” the association’s director says. “A lot of us would like to see verification.”
Considering that Airbnb saw a 91% increase in their Montana business just last year, this is a valid concern.
Last year Montana Airbnb hosts earned $20 million, according to the company.
However, the Montana Lodging and Housing Association hired an outside research firm named CBRE to review those numbers.
The firm reported to an interim legislative committee that the actual earnings were closer to $69 million, with the number of available Airbnb rentals growing 83% from 2016 to 2017.
Airbnb executives dispute those figures.
The issue is quite important.
In Montana last year, we had over 12 million people stay in hotels or campgrounds or BnB’s. The average stay was over 4 nights.
That’s a lot of money, and it’s a lot of money for the state. The 7% tax that guests are charged added up to $54 million last year, with $31 million going to the tourism promotion program and $23 million to the state’s general fund.
Remember, this time last year we had a budget shortfall of $227 million, so every little bit counts. And if Airbnb hosts aren’t paying their fair share of taxes, the Department of Revenue needs to look into this.
So are Airbnb hosts collecting this tax as they should…or are they not sure of their exact duties?
Airbnb doesn’t really clear it up.
On their site, the company says that hosts need to “familiarize themselves with the Occupancy Tax provisions which allow us to collect and remit taxes on their behalf.”
Continuing on, the company says that hosts can “instruct and authorize Airbnb to collect and remit Occupancy Taxes on their behalf in jurisdictions where Airbnb decides to facilitate such collection.”
Still, the company has “confirmed that it does not have a voluntary tax agreement with the state of Montana,” and the Department of Revenue isn’t able “to track whether Airbnb proprietors are paying the tax.”
Four months ago, the Department of Revenue made it clear that they want the state law to change so that Airbnb is required to pay the 4% accommodations tax.
I hope the members of the 2019 Legislature look into this more.
I’m not so sure.
For instance, that house that’s now being rented out to travelers and businesspeople won’t be rented out to Helena residents.
These are residents that work in the city, pay taxes there, and contribute a lot to the local economy.
But they’re not as important as the itinerant crowd that the Airbnb hosts cater to.
This means there are fewer houses, apartments, or even single rooms to rent for those that actually live in the city.
And when it comes to taxes…we’re not quite sure each of the 687,000+ rooms being rented out by Airbnb hosts in Montana are in fact paying their fair share of the lodging taxes.
Lodging taxes are currently 4% for facility use (which goes to the state’s general fund) with another 3% for sales tax (which goes to special revenue funds, the largest being the Department of Commerce’s tourism promotion unit).
So this is a 7% tax that each Airbnb host is supposed to collect from the guest.
Is that happening?
The Montana Lodging and Housing Association isn’t so sure.
“There’s a lot of question marks,” the association’s director says. “A lot of us would like to see verification.”
Considering that Airbnb saw a 91% increase in their Montana business just last year, this is a valid concern.
Last year Montana Airbnb hosts earned $20 million, according to the company.
However, the Montana Lodging and Housing Association hired an outside research firm named CBRE to review those numbers.
The firm reported to an interim legislative committee that the actual earnings were closer to $69 million, with the number of available Airbnb rentals growing 83% from 2016 to 2017.
Airbnb executives dispute those figures.
The issue is quite important.
In Montana last year, we had over 12 million people stay in hotels or campgrounds or BnB’s. The average stay was over 4 nights.
That’s a lot of money, and it’s a lot of money for the state. The 7% tax that guests are charged added up to $54 million last year, with $31 million going to the tourism promotion program and $23 million to the state’s general fund.
Remember, this time last year we had a budget shortfall of $227 million, so every little bit counts. And if Airbnb hosts aren’t paying their fair share of taxes, the Department of Revenue needs to look into this.
So are Airbnb hosts collecting this tax as they should…or are they not sure of their exact duties?
Airbnb doesn’t really clear it up.
On their site, the company says that hosts need to “familiarize themselves with the Occupancy Tax provisions which allow us to collect and remit taxes on their behalf.”
Continuing on, the company says that hosts can “instruct and authorize Airbnb to collect and remit Occupancy Taxes on their behalf in jurisdictions where Airbnb decides to facilitate such collection.”
Still, the company has “confirmed that it does not have a voluntary tax agreement with the state of Montana,” and the Department of Revenue isn’t able “to track whether Airbnb proprietors are paying the tax.”
Four months ago, the Department of Revenue made it clear that they want the state law to change so that Airbnb is required to pay the 4% accommodations tax.
I hope the members of the 2019 Legislature look into this more.
I decided to do a search of the available Airbnb rentals in Missoua for a week in mid-September.
A total of 159 homes came up, some charging as low as $20 a night for a South Hills bedroom to $199 a night for a whole house.
When I remove the date-range filter, I see that over 300 Airbnb homes are available in the Missoula area.
I decided to click on that $199-a-night house.
Turns out when I put in a 2-day stay for mid-September, the price drops to $167 per night.
That’s not the whole story, however. Here’s how it adds up:
- $167 for Night 1
- $167 for Night 2
- $125 for a Cleaning Fee
- $59 for a Service Fee
- $33 for Occupancy Taxes and Fees
That means it’ll cost me $550 to stay at that house for two nights.
Hey, that’s fine – if people want to pay that much to stay here for a couple days, go ahead.
What we’re concerned about as residents of the state, however, is whether the taxes are being paid and what affect all these new Airbnb’s have on our desperate Missoula housing market.
For instance, the average yearly tax rate for a $250,000 Missoula home is 0.92%, which comes out to $2,480 a year.
Now let’s imagine that $199-a-night rental is being rented out once a week.
That comes to $132 a month, or $1,584 a year.
That’s $896 less in taxes that the property owner is paying, but since they are required by law to pay taxes on their property plus the rental taxes, that should actually come to $4,064 a year…or nearly $1,600 a year more than most property owners pay.
In that regard, Airbnb is good for the state coffers…if hosts and the company are in fact paying those taxes to the state.
We do know that Airbnb and the state reached an agreement last year to cement the tax situation between the two entities. But as we saw, the state still isn’t sure it’s collecting all that it should.
When it comes to the housing issue, it’s not so easy…and there’s not a whole lot government can do.
And when you look at it from the host’s perspective, you can see their viewpoint.
I mean, why rent out your house to a bunch of unruly college kids that’ll spill beer everywhere, only to eventually move out without cleaning much up?
Wouldn’t they rather have a nice, older businessperson that’ll keep things tidy…and if they don’t, the national company will come in and charge them for it?
Plus, you can’t exactly charge long-time renters a bunch of cleaning and service fees. Sure, there’s the deposit that all renters pay, but that’s chump change compared to what a host can make in fees.
A $600 deposit that might run a year or more vs. hundreds of dollars in fees each and every month? You do the math.
Missoula landlords already have, and that’s why we’ve seen such an explosion in Airbnb rentals in the city over the past year or two.
Conversely, we’ve also seen our housing crisis get worse during that time, with fewer rental units available to families, students, low-income folks and seniors.
Airbnb is pricing most of them out of the market, and landlords are laughing all the way to the bank.
It’s good business, but terrible civicmindedness.
Notes
Dennison, Mike. “MT lodging industry says Airbnb rentals may be shirking tax payments.” KPAX. 3 May 2018. http://www.kpax.com/story/38105384/mt-lodging-industry-says-airbnb-rentals-may-be-shirking-tax-payments
Drake, Phil. “Airbnb says it has put Montana tax issue to bed.” Great Falls Tribune. 11 May 2018. https://www.greatfallstribune.com/story/news/2018/05/11/airbnb-reaches-tax-agreement-state-montana/598946002/
“Lodging Facility Sales and Use Tax.” Montana Department of Revenue. Retrieved 25 August 2018. https://mtrevenue.gov/taxes/miscellaneous-taxes-and-fees/lodging-facility/
“Montana Property Tax Calculator.” Smart Asset. Retrieved 25 August 2018. https://smartasset.com/taxes/montana-property-tax-calculator
“Occupancy tax collection and remittance by Airbnb in Montana.” Airbnb. Retrieved 25 August 2018. https://www.airbnb.com/help/article/2314/occupancy-tax-collection-and-remittance-by-airbnb-in-montana
