Kentucky Moves in for Its Cut of Airbnb Sales

As of Oct. 1, the state will be adding a 7 percent sales tax to all rentals through the popular short-term rental website. In 2016, homeowners in the state raked in more than $10 million.

by Beth Musgrave, Lexington Herald-Leader / September 19, 2017

(TNS) -- Kentucky homeowners earned $10.2 million in 2016 through short-term rentals on Airbnb, a popular home-sharing website.

Beginning Oct. 1, a 7 percent state tax will be added to all Kentucky Airbnb stays under a deal the company and the Kentucky Department of Revenue announced Monday. Airbnb estimates the state could receive $1 million or more under the long-awaited agreement.

That’s good financial news for a state that faces an estimated $200 million shortfall this year and is struggling to steady its ailing pension systems for public workers.

“Our goal is to work with all taxpayers fairly and equitably to ensure the appropriate taxes are paid and this agreement achieves that,” said Dan Bork, commissioner of the Department of Revenue. “Kentucky’s tourism sector is a huge economic driver for the state, so it is important to collect revenues for enhancing the quality of life for Kentuckians and our visitors.”

Collecting taxes from home-sharing platforms has long frustrated city and state officials that depend on hotel and motel taxes to pay for tourism efforts. The city of Lexington has recently broadened its education efforts to get hosts on Airbnb and other short-term rental websites, such as HomeAway, to pay hotel and motel taxes and other city fees.

Traditional hotels have also complained that Airbnb has an unfair competitive advantage because state and local tourism taxes have not automatically been added to customers’ bills.

Lexington, Louisville and other cities are still working with the home-sharing giant to ink similar deals to get their share of hotel and motel taxes. That’s particularly important in Lexington, where a 2.5 percentage point increase in the hotel and motel tax was earmarked to pay off a more than $230 million proposed expansion of the Lexington convention center slated to begin in early 2018. Lexington’s hotel and motel tax is 8.5 percent.

Airbnb and Lexington officials confirmed Monday that negotiations are ongoing.

Airbnb officials say the home-sharing platform has allowed smaller Kentucky cities that are under-served by traditional hotels to generate income from tourism.

“Home sharing is introducing a whole new world of travelers to the authenticity of Kentucky while offering new economic opportunities for thousands of Kentucky residents,” said Laura Spanjian, Kentucky policy director for Airbnb. “We are so proud to have collaborated on this agreement. We believe this can serve as a model for other states, and we are dedicated to finalizing additional agreements to collect and remit taxes with Kentucky municipalities.”

According to 2016 data provided by Airbnb, Louisville is the company’s top market in Kentucky, with 43,000 guests generating $6.2 million for Airbnb hosts there. Lexington is a distant second with 1,500 guests generating $1.8 million in revenue.

But even homeowners in some of Kentucky’s smaller cities are cashing in on the home-sharing trend. Bowling Green was third with 1,800 guests and $174,000 in revenue.

Stanton, which has a population of less than 3,000, generated 1,400 visits and a little more than $155,000 income. The Powell County town close to the Red River Gorge was the sixth most popular Kentucky city on Airbnb in 2016. Other small Kentucky towns on Airbnb’s Top 10 list of most stays include Berea and Nicholasville.

Airbnb says they have 3,100 hosts in Kentucky that earned an average of $4,500 a year in additional income. There were 80,000 guests who stayed in Kentucky Airbnb properties in 2016.

In comparison, Airbnb properties in Florida had 1.5 million guests in 2016, generating $273 million for those hosting on the platform in the Sunshine State, according to the Miami Herald.

©2017 the Lexington Herald-Leader (Lexington, Ky.) Distributed by Tribune Content Agency, LLC.