Maryland hotels, online rentals spar over paying taxes

By Pamela Wood, The Baltimore Sun 

Traditional hotels are making a push to require people who rent out their homes to guests to pay the same taxes and follow many of the same regulations that they do.

A bill before the Maryland General Assembly, backed by the hotel industry, is aimed at regulating short-term rentals through Airbnb, FlipKey, VRBO and similar websites. Properties listed for rent on those websites typically include homes or rooms owned by individual homeowners or investors.

Hotels and some rentals pay the state’s 6 percent sales tax, plus hotel taxes, which vary by location between 3 percent and 9.5 percent. Short-term rentals don’t uniformly pay those taxes.

“It equalizes everything,” said the bill’s sponsor, Democratic Sen. Joan Carter Conway of Baltimore, who made her case before the Senate Finance Committee Wednesday. “Everybody else has to pay the tax.”

The travel websites and property owners who use them are pushing back, saying that the taxes and regulations would push them out of business.

A handful of people who own rental properties on Smith Island told senators that while they already pay taxes, they worry about increased paperwork and regulations. Private vacation rentals are a key part of the tourism business on the small Chesapeake Bay island, which doesn’t have any major hotels.

Michele Davidson, who lives with her family part-time on Smith Island and rents out properties there to vacationers, said she’s relying on rental income to pay for her children’s college tuition.

“This is about big business taking over from citizens who work every day,” Davidson told senators.

Steve Shur, president of the Travel Technology Association, a trade group for the industry, said the bill would force homeowners to abandon renting out their properties.

“It’s one of the most onerous proposals we’ve seen in any state,” Shur said in an interview.

Shur said that while requiring taxes may be acceptable, it’s unfair to treat mom-and-pop property owners the same as large hotels. And he’s particularly concerned about a provision of the bill that requires rental companies such as Airbnb to book rentals only with property owners who are registered with the state, paying taxes and in compliance with local zoning laws.

It’s impossible for companies “to police the eligibility of every single property in every municipality,” Shur said.

Bruce Bereano, a lobbyist for Expedia and HomeAway, dubbed the legislation a “Marriott bill” aimed at driving away competition for its hotels.

“Marriott wants to crush short-term rentals in the state of Maryland,” Bereano said. Nodding to the Smith Island property owners seated with him, Bereano said lawmakers should “leave these fine people alone.”

Marriott has won previous battles over their competitors paying taxes.

Two years ago, the state hotel association convinced lawmakers to pass a law requiring hotel booking websites such as Expedia to collect taxes based on the room price they charge to customers — not based on the price the booking website pays to the hotel for the room. Republican Gov. Larry Hogan vetoed the measure, but it became law last year after the Democrat-led General Assembly overturned the veto.

T.J. Maloney, Marriott’s senior director of government and public affairs, said there’s room for both hotel companies like his and short-term rentals. He noted that Airbnb has triple the number of listings worldwide as Marriott has hotel rooms.

“This is a large, sophisticated player and they’re making a lot of money here in the state of Maryland, in essence by ignoring local laws that vary county by county and by not collecting the sales and lodging taxes,” Maloney told senators. “We are here today asking for parity on that front.”

Proponents of the bill said many of the requirements are about holding property owners and the online rental companies accountable because they, too, are businesses. They argued that short-term rentals already should be paying taxes.

“Airbnb is a $30 billion — with a ‘B’ — company that systematically does business in the state of Maryland,” said Frank Boston III, a lobbyist representing the Maryland Hotel Lodging Association.

Some counties have already considered local laws to regulate short-term rentals such as Airbnb listings. Baltimore City considered regulations last year, but shelved them. Baltimore County just introduced a bill that would clarify that either the property owner or the online rental company must collect and pay taxes. Airbnb has an agreement with Montgomery County to collect the hotel tax for properties on its website.

Some senators appeared to struggle with the bill. Many were interested in leveling the playing field, but worried about homeowners in their areas who rent space for special events. Sen. J.B. Jennings, a Republican who represents Harford and Baltimore counties, said visitors rent out homes for the Maryland Hunt Cup steeplechase race, while Sen. Adelaide Eckardt, an Eastern Shore Republican, said home rentals are important for the Ironman Maryland triathlon.

Conway said she would remove some parts of the bill that short-term renters and the online companies opposed, such as a requirement that the homes have sprinklers.

Sen. Thomas “Mac” Middleton, chairman of the committee, said he would appoint a group to work on details of the bill. He pledged multiple times that the committee would only pass a bill with reasonable regulations.

“We’re not going to put anyone out of business,” said Middleton, a Southern Maryland Democrat. “We want it to be sensible.”

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