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County officials hoping to ‘level playing field’ with hotel-motel tax

10/30/2015 6:00 AM |

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Officials at the county level are exploring various strategies to collect a 3 percent occupancy tax from tourists who rent private homes for brief periods through websites such as Airbnb and Homeaway — and they want those property owners to know they may be legally obligated to tax their guests. 

County Comptroller John Kennedy Jr. is pushing for those residential property owners to collect the same fee that established hotels and motels do on behalf of the county, although questions remain about whether that’s possible under existing laws.

“If there’s a property out there in Peconic where there’s 12 different families there on a rental basis 12 different weekends over the summer, that falls into our category of rental home,” he said. “Then, that owner falls into the category of obligation to collect and liability to remit.”

Currently, Mr. Kennedy said, thousands of such properties exist in the Suffolk — a large portion of them concentrated on the tourist-centered East End — though few of them are officially registered with the county to collect and remit the 3 percent hotel-motel tax. That gap is due partly to the complexities raised by online platforms and partly to the fact that many property owners are unaware they need to register.

But sensing a source of untapped revenue, county officials plan to change that through a combination of enforcement, education and potential partnerships with the websites themselves.

“The object here is not to put anybody out of business, but people should be aware that we are out there looking and we could be knocking on their door,” Mr. Kennedy said. “Let’s get some compliance with those entities that are engaged in the business now and level the playing field for the merchants that have been doing the right thing.”

Property owners aren’t required to pay the tax themselves, Mr. Kennedy said. Rather, just as registered hotels and motels do, they are obligated to collect an extra 3 percent from guests and hold that amount in remittance until it’s time to forward that money to the county, which usually occurs once a month.

Issues exist with the phrasing of the law, however. The county version of the hotel-motel law “shall include a tourist cabin, camp, resort, tavern, inn, boardinghouse, lodging house or any other establishment comparable or equivalent to any of those previously mentioned.” An owner who doesn’t register and collect the 3 percent tax faces a fine of up to $1,000 and up to a year in prison.

But Legislator Jay Schneiderman, who owns a hotel in Montauk, doesn’t think that law applies clearly enough to residential properties rented online.

“The hotel-motel tax has never applied to home rentals,” Mr. Schneiderman said. “You need a tax code that is clear. You can’t blame people for not doing something if they can’t figure out what it means.”

George Nolan, counsel to the Legislature, said the phrasing is “pretty broad” and could conceivably apply in such situations.

Mr. Kennedy couldn’t predict how much money the county might generate from taxing transient rentals that are booked online. The funds raised would remain at the county level — towns wouldn’t receive any of it, even if they have a higher proportion of short-term rental properties than others — though it would be used to fund local civic associations and historical societies, among other entities.

“Equal enforcement of the hotel-motel tax is not just about fiscal responsibility; it’s about fairness,” Suffolk County Legislature presiding officer DuWayne Gregory said in a statement. “Every hotel benefits from tourists who are drawn to Suffolk County’s attractions, and those attractions are enhanced by the hotel-motel tax. I commend Comptroller Kennedy for his increased efforts to ensure that every business is paying its fair share.”

As part of its effort, the county is also negotiating with Airbnb to develop a partnership whereby the company would collect and remit the occupancy tax on behalf of its hosts. Doing so would facilitate the process, Mr. Kennedy said, since the “point of sale” between host and guest already exists on Airbnb’s website.

Such agreements have already been struck in a number of locations, most notably San Francisco, where Airbnb recently put up a series of controversial advertisements describing the importance of its tax payments. One ad indicated that Airbnb brought in $12 million to San Francisco in 2014.

By participating in such programs, Airbnb hopes to legitimize itself and gain trust from communities.

Several short-term landlords interviewed said they have no problem with the county collecting a hotel-motel tax on their guests, especially when compared to the larger issue of Southold Town’s 14-night minimum on transient rentals.

“The two-week stay is much more problematic than the 3 percent tax,” said Lora Sappenfield, a part-time Greenport resident who rents out her home on Airbnb. “I don’t feel that the people who rent from me will have as much a problem with a little bump in the price as they will with having to rent for two weeks.”

Conni Cross, who uses VRBO to rent out four different properties near her Cutchogue home, feels the tax could help “legitimize” landlords like herself.

However, she said that for stays of two to four weeks the tax becomes “a completely different animal” since the fee becomes that much higher.

“If they want to treat us like a [bed and breakfast] — [bed and breakfasts] don’t have people stay for a month or for two weeks,” Ms. Cross said. “They have short-term rentals. So I’m against the tax for over two weeks because it’s already a very small segment that needs a two-week rental and more. And they’re stretching as it is.”

Most of those interviewed indicated they don’t currently collect hotel-motel taxes — and were unaware they needed to. Mr. Kennedy said he intends to launch an awareness campaign after his office merges with the treasurer’s office on Jan. 1.

“This is a two-pronged approach: We want to get compliance and get folks in, but we also want to take it as an opportunity to build awareness out there,” he said. “At the end of the day, it’s not their money. It’s the patrons’ money. They’re just charged with the obligation to collect.”

Photo Caption: Conni Cross rents out this cottage, along with three other properties near her Cutchogue home, using VRBO. She said she has no problem with a 3 percent hotel-motel tax on short-term rentals, but is more concerned about Southold’s 14-night minimum on such rentals. (Credit: Chris Lisinski)

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