Local Governments Struggle with Handling Airbnb Tax Cheats

Aug 17, 2016

The new disruptive economy is shaking up everything from the newspapers to the music business, and the latest target is the hotel industry. But local governments aren’t getting their cut of the action, at least not yet. 

Arlington County collects a 5.25%  lodging tax from all of its hotel rooms. But what about all those new Airbnb rentals, where people use a smart phone app to rent out rooms? Arlington Commissioner of Revenue Ingrid Morroy says her office has no way of knowing who’s renting out those rooms. 

“You don’t see addresses unless you sign up to rent a room, but I cannot ask my staff to sign up to rent a room just to get the addresses so we rely on anonymous tips and voluntary compliance."

Credit Wikimedia Commons

So far, very few of the folks who should be paying taxes have stepped up to fork over the money. That’s why Virginia Beach is trying a different strategy. This week, the City Council there passed a new measure that created a $1,000 fine for all those people who fail to pay their fair share. Phillip Kellam is Commissioner of Revenue. 

“And the basis for me taking this approach was being in contact with localities around the nation, and they’ve uniformly said unless you have at least a thousand dollar fine nobody is going to pay attention."

State leaders are still trying to figure out if they want to force Airbnb to collect taxes statewide. That idea is likely to be taken upon in the upcoming General Assembly session next year.