State Room Tax Changes Could Complicate Municipal Payment

When Gov. Scott Walker signed the 2017-19 biennial state budget on Sept. 21, it included a provision that will change the way room tax is collected for lodging websites such as Airbnb and Vacation Rental By Owner (VRBO). The changes could make a municipality’s room tax revenue in Door County difficult to determine.

These websites, which the state calls lodging marketplaces, must now register with the Department of Revenue (DOR) and collect room tax dollars when they receive payment for the vacation rental.

Josh VanLieshout, chair of the Door County Tourism Zone Commission (DCTZC) and Sturgeon Bay city administrator, said the new process is cause for concern depending on how these lodging marketplaces record data on the rentals. Although the state law dictates lodging marketplaces must collect applicable room tax and send it back to the municipality, the effectiveness of that provision hinges on the way these marketplaces collect data on their rentals.

“The issue we have with this is, depending on how the information is recorded to the state and remitted to the tax agency depends in a large part on how the lodging marketplaces collect their own information,” said VanLieshout. “How do we know who’s share of the room tax goes where?”

Members of the DCTZC expressed concern that groups such as Airbnb collect geographic data based on zip codes, which rarely line up with municipal lines.

Commission member Elizabeth LeClair noted that Jacksonport is made up of three different zip codes which also stretch into surrounding municipalities. If a tourist stays in a hotel that is in the Town of Jacksonport, but is in a zip code shared with other municipalities, it may not be possible to track where the room tax revenue from that unit rental should go.

Jack Moneypenny, executive director of the Door County Visitor Bureau, explained that the budget item was widely popular because room tax collections from companies such as Airbnb and VRBO were falling through the cracks in other cities across the state. The new law will lift the burden off of the local municipality to enforce its room tax laws on these rentals and shift that burden to the state and to the lodging marketplaces.

Moneypenny said the City of Madison, which did sign a separate agreement with Airbnb to have the company collect room tax and forward payment to the city, recently got an $85,000 check from such rentals without any additional work by the city.

But since Kim Roberts, DCTZC administrator, has spent many hours searching for these properties and bringing them into compliance resulting in near full contribution of lodging marketplace properties with local room tax ordinances, there was hardly any money falling through the cracks. Instead, the new provision will complicate the logistics of administering room tax dollars to the correct municipalities.

According to the DCTZC, lodging marketplaces will be required to sign agreements with all 19 Door County municipalities who collect room tax. The DCTZC is suggesting each municipality specify how data will be collected on room tax collections before signing the agreement.

“When [lodging marketplaces] come to Jacksonport (or any municipality) to sign an agreement… it’s up to the board to negotiate with them that we want to see full transparency, where the dollars come from,” said Moneypenny.

Commission member Bill Weddig suggested putting together a short manual for lodging operators and rental owners on the changes and how a municipality should negotiate an agreement.

VanLieshout was not confident in the power of small Door County municipal boards against the multinational corporations.

“I have very little confidence that outside of perhaps Madison, Green Bay, Milwaukee, any community will have much success in changing these agreements with Airbnb,” said VanLieshout. “Our next plan of strategy is to try to get a seat at the rulemaking table with the Department of Revenue and pull them along with these issues. I don’t have a lot of confidence with our ability to do that either but we need to make an attempt to do that.”

There are currently 580 Door County rental units on VRBO and 202 on Airbnb, although the numbers could be misleading because hotels can post their units on VRBO and many lodging operators post their rentals on multiple lodging marketplaces, leading to multiple listings for a single rental unit.

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