Airbnb sets room tax collection pact with city; ordinances clarified for hosts

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A newly amended City of Racine ordinance for short-term room rentals clarifies city rules for Airbnb hosts and those who rent rooms in their homes or other buildings.

Added to that is a tax collection agreement with Airbnb that goes into effect June 1. It will assure that the city gets room taxes from Airbnb renters.

Airbnb will automatically collect and remit the Racine Room Tax of 8 percent for bookings. It relieves individual hosts from having to collect and pay the taxes to the city.

It is Airbnb’s fourth tax agreement in the State of Wisconsin. The company previously agreed to collect and remit room taxes for the cities of Madison and Green Bay — similar to the agreement passed by Racine. Additionally, last year the company struck a deal with the Wisconsin Department of Revenue to collect and remit state sales taxes on taxable bookings throughout the state.

“In addition to our existing tax agreements with Madison and Green Bay, we hope this agreement can serve as a model for other Wisconsin municipalities looking to take full economic advantage of the sharing economy,” said Laura Spanjian, Midwest policy director for Airbnb.

“The individual hosts don’t have to do anything, it’s all taken care of by Airbnb, which we appreciate,” said City Administrator Jim Palenick. “When you have the corporate entity collecting the tax, it makes it easier (for the city).”

Airbnb reports that it currently has 40 hosts in Racine County.

Looking ahead

“We are looking at the future,” explained Palenick. “We know we don’t have a lot of Airbnb hosts in the city right now, but we know that the Foxconn (project) will have 10,000 construction workers descend on this area in the next few years. And we know there is nowhere near enough lodging capacity, so the natural consequence will be things like Airbnb (and similar businesses).

“People will look to rent rooms in their homes and spare spaces. We think we will see an exponential increase among the number of hosts within a year or so. And it will increase in orders of magnitude: 40 will become 400 which will become 4,000.”

Palenick added, “It was important for (the city) to get out in front of that. Not only in the voluntary collections agreement with Airbnb, but also in the ordinances that say this is where you can do it, and this is how you can do it.”

Essentially, an Airbnb host can rent rooms in buildings in residential, commercial and industrial districts as an accessory use under certain conditions.

Looks like someone’s home

“In some cases, you have to accept that (an Airbnb site) looks like someone’s single-family home,” said Palenick. “It doesn’t alter the neighborhood much beyond that if the house remains the primary residence of the owner.

“It’s OK to rent out a room in your home as long as it remains your home. Then, the use is much the same. It’s not a B and B, so you don’t have some of the health issues when people are staying there. You have to recognize that and put in just enough regulation to see to the health and welfare of the neighborhood. But not be so rigid as to restrict this in an inappropriate way. We want to allow people (to be hosts) while still protecting the public.”

Adapting to this business model is not that different than other emerging technologies and applications.

“It’s a different world and you have to adapt to it,” said Palenick. “What Uber and Lyft did to the taxi business (Airbnb) is doing to the lodging business. You have to recognize it.”

The city will not even guess what kind of revenue will be produced from the tax, but it expects it to be substantial.

“Any estimate would be speculative, said Palenick. “All we know is that it will be significantly more than we are seeing now. It’s hard to know how those construction workers will translate (into room occupancy) in our community. But I think it will be dramatically more than it is now.”

The ordinance approved this week sets out a few new rules for Airbnb and similar rentals while clarifying others.

“The ordinance deals with ancillary issues in the same way it does with any zoning regulations,” Palenick noted. “Parking has to be on a hard surface. You have to live up to building codes. Trash has to be properly contained, like any residency. When you do those basic things, (an Airbnb) doesn’t look that much different than any other occupancy.”


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