OCEAN CITY — Resort tourism officials this week continued the debate on the potential impact of Airbnb and the likelihood many of the 300-plus listings in town are not remitting the requisite room tax.
In July, the Tourism Committee attempted to gain a better understanding of the impact of Airbnb and similar companies that provide an online platform for connecting visitors to accommodations in the resort. Airbnb and other Internet sites enable property owners to rent homes, apartments and even single rooms to visitors searching online for accommodations by bypassing the traditional rental companies.
On Monday, the Tourism Committee renewed the debate, which ended with seemingly more questions than answers. What appears to be clear, however, is the online vacation rental property is here to stay with over 300 listings in Ocean City as of Thursday, from a lavish beachfront condo at over $1,100 a night to a modest bayside block studio apartment at just $50. The average price for the 300 or so properties listed in Ocean City was $256 per night.
As Uber has changed the transportation industry, Airbnb is making remarkable inroads on the traditional rental industry with millions of available accommodations in thousands of cities and countries across the U.S. and worldwide. The property owners pay Airbnb and similar companies a percentage of the rent collected to list their homes, while the renters often pay a larger percentage to the company for providing the service.
In essence, Airbnb gets them coming and going, and the convenience and selection has turned it into a major industry. While it has been around for nearly a decade, the impact of Airbnb and similar companies has started to make its presence felt in the resort. Ocean City Hotel-Motel-Restaurant Association Executive Director Susan Jones said on Monday Maryland hotel and motel lobbyists are currently considering legislation to better regulate the growing trend of online vacation rental companies.
“They’re working on what would be appropriate for the hotels in terms of legislation,” she said. “They’re trying to decide if it should be one big bill or split into a couple different bills to cover the various issues.”
Airbnb and similar companies that offer online vacation rentals are becoming a major concern in a resort town that earns its living in the hospitality industry and whose budget relies heavily on room taxes. Worcester County collected over $13 million in room tax last year, largely derived from Ocean City, but that figure could take a substantial hit if Airbnb and similar companies come in and take a sizable portion of the rental market without collecting or remitting the requisite sales and room taxes.
It’s important to note it is the property owner’s responsibility to remit the appropriate room tax to the county for rentals under six months, but because there are so many and because of the proliferation of online rental companies and even vacation rentals by owner, many are likely not acquiring rental licenses or paying the required sales and room taxes, according to Ocean City Chamber of Commerce President Brett Wolf.
“The county expects the property owner to pay the tax,” he said. “At three-and-a-half percent for Ocean City times a thousand properties, it’s a significant amount of money. Room tax is an honor system, and if the property owner doesn’t pay it, they’re not going to go looking for them. Nobody is going to pay unless there is some good reason to do it.”
Wolf said legislation regulating Airbnb and similar companies should be pursued, but the challenge remains enforcing what is already on the books.
“It’s not a new tax,” he said. “It’s simply collecting a tax that has already been paid.”
Wolfe said the county currently doesn’t have a real hammer in collecting rental taxes from direct rentals to consumers and used an example of a property renter with noise violation or other violations.
“Take an example of a guy who has had multiple noise violation or underage drinking violations for his renters, but hasn’t gotten a rental license since 2008,” he said. “Now, when he gets caught with the violations, he needs to get a rental license within 30 days.”
While it remains uncertain just how much room tax is not being collected, it is likely substantial considering the number of listings in Ocean City and across the state.
“Think about how much money the city is losing,” he said. “The state is losing twice that much.”
Jones said some might be unaware of their rental tax obligation, while others are simply side-stepping it.
“The county has said there are probably plenty of people out there getting away with it because they don’t have the resources to track it,” she said.
However, Councilman Dennis Dare said property owners in the resort are made plainly aware of the obligation.
“Anybody who has bought property in Ocean City gets a letter explaining their obligation for rental taxes,” he said. “It shouldn’t come as a surprise to anyone.”
