Beginning on July 1, Airbnb's more than 1,800 active home-rental hosts in Connecticut will collect the 15 percent hotel tax, and remit the money to the cash-strapped state. Airbnb users were notified late Wednesday of the agreement, which was negotiated by company officials and tax commissioner Kevin B. Sullivan over several months.
"For people across the state of Connecticut, Airbnb is making it possible to make ends meet, pay the bills and stay in their homes," said Josh Meltzer, regional director of public policy for Airbnb. "Thanks to the leadership of Connecticut officials, our community can now contribute new tax revenue to their communities and continue to bring new revenue and visitors to hundreds of Connecticut local businesses."
"This agreement allows the state of Connecticut to harness the economic impact of home sharing while also making it easier for Airbnb hosts — the vast majority of whom are middle class people sharing their own home — to comply with local tax laws," Meltzer said. "We look forward to working with state officials to implement this agreement."
Connecticut will join several states that collect the taxes, including North Carolina, South Carolina, Florida and Alabama, as well as more than 150 municipalities.
Sullivan could not be reached for comment Wednesday. But in a recent interview, he said capturing revenue generated by Airbnb and other new players in the sharing economy is a priority.
"These are entities and activities that don't fit traditional views of how people do business,'' Sullivan said. "They cross boundaries in terms of taxation and the states and the feds have been struggling to catch up.''
A study submitted to Congress last month found that the IRS has been slow to adapt to the peer-to-peer economy. Billions of dollars in taxable income are slipping through the cracks of a federal tax code that has failed to keep pace with the rapid growth of firms such as Airbnb, Uber and Etsy.
"This is so new and it's growing so fast,'' said the study's author, Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University. "This is a huge sea change that has gone basically unacknowledged by most government measures ... the IRS has been caught a bit flat-footed.''
Many of the same issues are playing out on the state level, Sullivan said recently. "We are so out of sync with electronic commerce,'' he said. "Vast amounts of business are conducted every day that escape taxation ... Uber and Airbnb .... are all examples of a slice of the economy that no one thought about 10 years ago."
The agreement with Airbnb is a symbolic step in a larger movement to integrate new economy firms into the tax code. The effort began about five years ago, when Sullivan negotiated a landmark deal that has allowed the state to collect millions of dollars in tax revenue from sales generated by the online giant Amazon. Sullivan notes that the online vacation rental site Homeaway has a far more robust presence in the state than Airbnb.
It is unclear how much revenue the agreement with Airbnb would generate. The newly approved state budget estimates the state would collect $1 million in lodging taxes from the site's users, a fraction of the state's overall $19.76 billion budget.
But Sullivan said it is as much a matter of fairness as it is about generating tax money. The hotel industry and brick and mortar retailers are subject to taxes that some of their newer online competitors have avoided.
"The one thing all these businesses have in common: somebody's doing the same thing and collecting and remitting taxes,'' Sullivan said. "It's hard for the ones that are competing with the untaxed to understand what the principle difference between these entities is."
Matthew Kiessling, director of coalitions and grassroots for the Travel Technology Association, which lobbies on behalf of Airbnb and other online rental sites, said the industry supports taxes, as long as they are in line with those assessed to hotels, inns and bed and breakfasts.
"There's massive economic opportunity here, whether from the home owner perspective or the traveler perspective,'' Kiessling said. "If the states put a framework in place, the economic opportunity is there for them as well."
Between June 1, 2015, and June 1, 2016, 54,000 visitors stayed in Connecticut via Airbnb, with the typical trip lasting 3.4 nights, according to figures provided by the company. Airbnb hosts in the state earned a collective $3.5 million in revenue during that span.
©2016 The Hartford Courant (Hartford, Conn.) Distributed by Tribune Content Agency, LLC.
