If the state could raise $18 million a year by making a business collect a tax it should have been collecting already, while simplifying the tax-collection process, making it easier on customers and business owners, and helping local governments generate more revenue, you’d do it, right?
That’s good. Because Gov. Andrew Cuomo has proposed as part of his executive budget that short-term property rental companies like Airbnb and Vrbo start collecting the 4% state sales tax and other local taxes as part of its regular practices.
Right now, the rental property hosts are supposed to pay the sales tax, along with any local occupancy taxes. But they do it separately from the fees they collect from renters, which creates an administrative burden on them, as well as potentially deprives the governments of tax revenue.
Besides the state getting the revenue to which it’s entitled, having all the hosts collect the tax has other benefits.
First, it makes the tax system equitable. Some hosts paying the tax and others not is unfair to those who are following the law.
The policy will create a degree of consistency among rental organizations so everyone knows what’s expected of them, and simplify tax collection and payment.
From the perspective of hotels, motels and other well-regulated lodging businesses, having short-term rental companies collecting the tax places them all on a more even competitive footing.
The tax collection requirement also may be the first step toward making regulations between the two industries more equitable.
State legislation separate from the governor’s proposal, such as Senate bill S1658, not only would require the collection of taxes from short-term rentals in large cities, but also require short-term rental hosts to register each unit with the state, keep records of occupancies for a year and place restrictions on the length of visitor stays.
Another bill would require tougher safety standards for short-term rentals.
Of course, there are some who don’t favor the tax collection measure.
Some renters who would have to suddenly collect the tax fear they may have to raise their prices or reduce their own profits to pay it. And they worry that renters might shy away from their properties because of the additional cost.
But others say taxes and fees are usually not a major impediment to people renting from them, and that they can absorb the small additional amount that the tax will add to the bill – $4 on each $100 rental price.
A final note: The governor’s tax-collection proposal shouldn’t be limited to the large commercial rental companies like Airbnb and Vrbo. It should apply to all short-term rental properties.
This modest adjustment to the industry will generate more revenue for state and local governments, make the taxing policy simpler and more consistent within the industry, make short-term rentals more competitive with traditional lodging, and not drive away customers.
It’s a good deal for all.