Friday, May 17, 2013

A New Effort to Tax Vacation Rentals in Oregon - will it happen in your state too?

Oregon state legislators are trying to find a new way to assess taxes on vacation rental activities. Oregon House Bill 2656 would expand and increase taxes on tourism, by attempting to capture tax revenues on special service fees and any other charges associated with booking a hotel room or a vacation rental.

Oregon already has a statewide lodging tax.  Most local communities have lodging taxes too, so tourists often pay between 10% and 15% in lodging taxes when they visit our state.  Lodging taxes are common, but to my knowledge no other state has lodging tax laws that would be as invasive as the laws in Oregon would be if this new bill passes.  If the law passes in Oregon, other states will take notice and this could become a nationwide trend.

The new tax would have immediate impact on vacation rental owners and the businesses that serve rental owners and their guests.
  • If your property is booked through an on-line travel site like AirBnB, Expedia or Homeaway, and you pay the site any fees for handling your booking transaction, the listing site would pay a new tax on those fees, and the tax would be passed through to the property owner.
  • If your property is booked through a local travel agent or a rental property managers and there are any per-booking fees or other charges associated with the booking, the agent or manager would pay a new tax on those special fees, and the tax would likely be passed through to the property owner.
  • If you book your own properties, and there are any special service fees that would not normally be taxed under existing local and state lodging taxes (hot tub usage fees, cleaning reimbursements, etc.), under this new bill a tax might be assessed.
  • Regardless of what your association is with Oregon tourism, the new tax could have negative impacts on vacation rentals, bed & breakfasts and small locally owned hotels, decreasing bookings and interfering with the current economic recovery, especially in small rural communities that depend on tourism.
Some opponents of the bill say it favors large, out of state, corporate hotel chains.  These chains handle most of their bookings internally, so there are no extra fees to tax.

Proponents of this new tax apparently do not realize that online travel sites, property managers and short term rental owners promote Oregon to a world of potential tourists at no charge to the state. In doing this they generate $8.8 billion in spending in the state, help fill the state's tax coffers, bring significant tax revenues to many small communities that desperately need them, and support between 90,000 and 100,000 jobs in the state.

Small lodging operations are a primary driver of tourism into small Oregon towns, and are often one of the 3 largest sectors of local economies that help such towns survive.  Taxes are a fact of life, but lets be smart about what we tax.

It makes no sense to discourage tourism with a new tax, and then turn around and spend millions of dollars promoting the state as a tourist destination.

It makes no sense to lay a new tax in the lap of small business owners statewide who work hard to bring tourism into our communities, while these businesses are struggling to survive, and are already collecting significant tax revenues for local and statement government activities.

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