Bed tax blues: Should Airbnb have to pay?

By Laurie Hamame -

Whether an apartment for a night, a cabin for a week, or a castle for a month, as online home-sharing continues to grow, hotel owners have taken notice.

Innkeeper Joe Woodward has welcomed guests to his historical 1830 Hallauer House in since 2003. With half a million dollars invested in the award-winning bed-and-breakfast, Woodward was astonished by the steep decline in business in the past two years, he told council in December.

He pointed fingers at the Hotel at Oberlin and Oberlin College. A list of suggested places to stay in the city are on the college’s website, organized by their distance from campus. Since the Hallauer House is number 14 on the list, “that’s cost a lot of business,” Woodward said.

The larger issue is the growth of Airbnb, the large peer-to-peer hospitality service that is rewriting the rules of vacation accommodations. Hosts can rent out their private property to short-term subletters around the world.

Airbnb, valued at more than $30 billion, claims to have organized more than 260 million stays. Millennials are leading the charge, with two-thirds of guests aged 35 or younger, and paying an average of $55 per booking.

Woodward argued to council that temporary rooms in Oberlin should be regulated and providers should be subject to six percent occupancy taxes.

“These are rooming houses and they do not pay their tax,” he said, handing council a list he compiled of B&Bs in the city. “They do not pay the county tax and I found out today they do not pay your city tax.”

Oberlin’s lodging tax is three percent of the room rate and is only required for lodging with five or more rooms, said finance director Sal Talarico. The Hallauer House, located in Pittsfield Township, is exempt from the city’s bed tax, but not the county’s, which is another three percent.

With Airbnb, anyone can become a sporadic landlord, but hosts aren’t immune to federal, state, and local taxes on their pocketed cash — or so we thought.

Under the IRS’s 14-day rule, taxes aren’t required on income earned from short-term rentals, as long as the property is rented for no more than 14 days during the year and the property owner uses the house for at least 10 percent of the total days it is rented to others.

There’s one catch — if hosts choose to exclude rental income, they cannot take any deductions either.

Understanding the tax consequences of renting property — whether just a portion of a home or an entire residence — is not a straightforward process. Section 280A of the Internal Revenue Code, which governs home rentals, is a complicated tangle of jargon.

Woodward dug into Oberlin’s own ordinance database and found about 75 that regard the operation of casual residences — everything from fire suppression systems, electrical lighting, plumbing, and smoke detectors.

“I have found none of them to be enforced,” Woodward said. “No one’s been inspected. None of these places operate above board. They literally are clandestine.”

Fire chief Bob Hanmer and planning director Carrie Handy are pursuing inspections of the identified B&Bs to assure they comply with the International Fire Code, International Property Maintenance Code, Ohio Fire Code, and Oberlin Zoning Code.

Inspections may include confirming proper location, size, and lighting requirements for egress routes, said city manager Rob Hillard.

Laurie Hamame can be reached at 440-775-1611 or @HamameNews on Twitter.

By Laurie Hamame