HomeMy WebLinkAboutAgenda - 02-02-2016 -13-5 - Information Item - Memo Regarding 2015 State of Airbnb in North Carolina and Orange County INFORMATION ITEM
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Founded in 1752 in the year! of North Carolina
Date January 21, 2016
To: Orange County Commisioners
From: Laurie Paolicelli, Director of Community Relations and Tourism
Re: 2015 State of Airbnb in North Carolina and Orange County
Response to Commissioner Penny Rich's petition
In response to Commissioner Rich's request for information on the state of Airbnb regulatory efforts and
tax collection in Orange County,please accept this update:
After months of pressure from North Carolina Restaurant and Lodging Association(NCRLA) Airbnb
first began collecting and remitting sales tax statewide on June 1, 2015, and also began collecting and
remitting occupancy taxes in four counties–Buncombe, Durham, Mecklenburg, and Wake—at that
same time. Then the full-fledged statewide tax collections began on August 15, 2015.
Orange County was one of 96 counties in North Carolina to receive a statement from Airbnb dated July
30, 2015 providing notification that it would begin remitting tax collections starting on August 15, 2015.
Airbnb has remitted monthly as required since that time, based on the gross receipts obtained each
month from its clients.
All occupancy taxpayers are required to submit a return each month even if they do not have taxes to
remit. If there were a month in which Airbnb (or any other occupancy taxpayer) did not submit a return,
the Orange County Tax office would notify them by mail that they did not receive the return and/or
payment and notify them of the assessed penalty. They would have 15 days to remit the assessed
penalty, along with the missing return and taxes owed if applicable. If they still did not remit, Orange
County would follow the enforcement remedies as set by G.S.105-236 for failure to pay or file a return
for State sales and use taxes.
In Orange County, Airbnb currently (12/29/2015) lists:
123 entire home rentals; 140 private room rentals
The Visitors Bureau estimates 158 rooms booked per day through Airbnb which would yield $646,191
combined occupancy and sales tax.
It is recommended that Orange County work with municipalities to review compliance and tax
remittance and recommend greater enforcements.
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ORANGE COUNTY
In S T ORS BUREAU
AIRBNB IN ORANGE COUNTY AND NORTH CAROLINA
CURRENT REGULATIONS
Effective August 15, 2015, Airbnb began collecting and remitting occupancy taxes statewide in
North Carolina in all local jurisdictions that impose such taxes.This made North Carolina the
first state in the nation where Airbnb is collecting and remitting both sales and occupancy taxes
in full compliance with state and local laws.
After months of pressure from North Carolina Restaurant and Lodging Association (NCRLA) and
the lodging community as a whole, Airbnb first began collecting and remitting sales tax
statewide on June 1, 2015, and also began collecting and remitting occupancy taxes in four
counties– Buncombe, Durham, Mecklenburg, and Wake—at that same time. Then the full-
fledged statewide tax collections began on August 15, 2015.
Many state travel and tourism associations played a key role in shaping the debate and in
underscoring the stark contrast of regulations that the hotel industry abides by that short-term
rental companies and some commercial operators currently avoid. The travel and tourism
industry will continue to work alongside federal, state, and local officials to address issues
including zoning, affordable housing, insurance, and common sense safety, security, and health
and fire standards for short-term rentals.
ORANGE COUNTY COLLECTIONS PROCESS
Orange County was one of 96 counties in North Carolina to receive a statement from Airbnb
dated July 30, 2015 providing notification that it would begin remitting tax collections starting
on August 15, 2015. Airbnb has remitted monthly as required since that time, based on the
gross receipts obtained each month from its clients. Cumberland, Currituck, Dare and Moore
confirm this as well. Buncombe, Durham, Mecklenburg, and Wake began their collections on
June 1, 2015.
All occupancy taxpayers are required to submit a return each month even if they do not have
taxes to remit. If there were a month in which Airbnb (or any other occupancy taxpayer) did not
submit a return, or return and payment, they would be subject to penalties.
The Orange County office would notify them by mail that they did not receive the return and/or
payment and notify them of the assessed penalty.They would have 15 days to remit the
assessed penalty, along with the missing return and taxes owed if applicable. If they still did not
remit, Orange County would follow the enforcement remedies as set by G.S.105-236 for failure
to pay or file a return for State sales and use taxes.
3
ECONOMICS
For Orange County, Airbnb currently (12/29/2015) lists:
123 entire home rentals
140 private room rentals
Total 263 in Orange County
Airbnb uses the average daily rate of$83. Using an NC industry average of a 60% daily
occupancy rate, we estimate 158 rooms booked per day through Airbnb at $83 equal
approximately$13,000 per day in revenue: Or $4,786,610 per year in revenue which would
yield a 6% occupancy tax collection of$287,196 and yield a 7.5% sales tax of$358,995 or
$646,191 combined occupancy and sales tax.
BACKGROUND
Since it was founded in 2008, Airbnb has turned the hotel industry upside down. It rakes in
$500 million to $1 billion a year, Glassdoor reports. Airbnb makes money by taking a 3% cut of
each booking and a 6%to 12% service fee from guests.
Rapid growth of the short-term online rental marketplace created challenges for the lodging
industry and the regulatory system. Short-term online rentals are rentals of residential property
for a short period of time through online platforms such as Airbnb, Home Away or Flip Key.
Laws currently on the books that were developed years ago for traditional lodging properties
were allowing these new business models an opportunity to bypass the system and generated
great concern for the North Carolina lodging community.
The North Carolina Restaurant and Lodging Association's position on the short-term online
rental marketplace rests on four basic points:
First, the North Carolina lodging community does not fear competition and does not seek to
ban short-term online rental companies. Instead, the lodging community is concerned about
inequities in the treatment of traditional lodging properties versus short-term online rentals
under state and local laws, rules, and health and safety codes. Competition is a hallmark of the
lodging industry. Traditional lodging properties fiercely compete against each other every day.
But short-term online rental companies are avoiding paying state and local taxes and they are
skirting rules and regulations meant to protect guests and communities. And that's simply not
fair competition.
The challenge is that the rapid evolution of these new business models is disrupting traditional
models of commerce and the laws and rules that were developed years ago to regulate
traditional models. Traditional lodging properties are required by law to provide a safe,
sanitary and secure environment for their guests.These requirements include clean sheets and
towels, hot and cold running water, smoke detectors, carbon monoxide detectors, clearly
marked exits and fire escape plans, to name just a few. State law treats the rental of rooms as a
retail business, triggering requirements that lodging establishments obtain appropriate
business licenses and remit sales & occupancy taxes to state and local governments. The short-
term online rental marketplace operates under the regulatory radar screen. While data on this
marketplace is limited, every indication is that businesses in this space are operating without
4
appropriate licenses, without paying sales and occupancy taxes, and without following health
and safety rules.
Second, the short-term online rental marketplace does not consist primarily of small "Mom and
Pop" operations. Several of the largest short-term online rental companies are valued in the
billions of dollars, making them larger than several of the world's most notable hotel chains.
This is big business and it should be recognized as such. It is critically important to distinguish
between individuals who are in the business of renting rooms for profit and those simply
renting rooms on a rare occasion or for a special event. If you are routinely renting out rooms,
or encouraging renting out rooms for the purpose of making money, you are in the lodging
business and you should be treated as a lodging business.
Third, it is unwise to group all facets of the "sharing economy" together. Short-term online
rental companies have clear differences from other businesses in this new space. Most notably,
there is no process in place for becoming a short-term online host. With no process in place,
there is no way to be certain who the hosts really are. Many hosts are well intentioned, but
nefarious actors are likely to hide until it is too late. As many of the short-term online rental
companies like to say, "Anyone can be a host" —and this is of great concern to the lodging
industry. The lack of key consumer protections and proper oversight should be of equal concern
to lawmakers and regulators alike.
Fourth, there is a disturbing trend across the country. Many communities and policymakers
have ignored concerns about the short-term online rental marketplace until it is too late. North
Carolina policymakers and regulators have begun to study this issue and address the concerns
and inequities between traditional lodging providers and short-term online rentals. The growth
of the short-term online rental marketplaces presents an opportunity to ensure a fair, free
market for lodging services across North Carolina and ensure all businesses that contribute to
this state's economy are provided fair and equal opportunities to succeed.
2016 AIRBNB FOCUS (Extracted from Airbnb website/newsroom)
• During November's annual Airbnb Open 2015 conference in Paris, there was a clear shift
toward a greater emphasis on the Airbnb host community as the primary value
proposition for the brand.
• The sense of community surrounding Airbnb is becoming its greatest differentiator in
the travel marketplace. Moving forward, the company is prioritizing its ecosystem of
hosts above everything else to both further cement its relationship with those hosts and
address the concerns of people who haven't tried room sharing.
• Presently, the biggest cloud raining on Airbnb's parade is the regulatory hurdles
constantly played out in the media. Chesky emphasized that everyone at Airbnb,
including Airbnb hosts, want the room sharing industry to be fully regulated, because
that will legitimize the industry as an industry.
• "Many of us want to be regulated, because to be regulated is to be recognized," Chesky
explained. "We don't think home sharing should be in the shadows.... I'm looking
forward to maybe a future stage with Airbnb where we can look at the idea of hosting
being legitimized in 34,000 cities around the world as a thing of the past."
5
SUMMATION AND RECOMMENDATION
As the area's tourism agency, it's important for the Visitors Bureau Board to understand
how the laws work in Orange County, our municipalities and surrounding cities such as
Durham and Raleigh. Some cities have laws that restrict their residents' ability to host
paying guests for short periods.These laws are often part of a city's zoning or
administrative codes. In many cities, hosts must register, get a permit, or obtain a
license before they can list their property or accept guests. Certain types of short-term
bookings may be prohibited altogether. Local governments vary greatly in how they
enforce these laws. Penalties may include fines or other enforcement. In some tax
jurisdictions, Airbnb administers the calculating, collecting, and remitting local
occupancy tax on hosts' behalf.
It is recommended that the Visitors Bureau work with town managers to review
compliance and tax remittance and recommend greater enforcements.
For additional information on this report, please contact the Chapel Hill/Orange County
Visitors Bureau, Laurie Paolicelli, Director. 919-245-4322.
Lpaolicelli @orangecountync.gov