Whatever Happened With

AirBnb in Philly: Millions in tax dollars, but nobody’s saying how much

Because why would that be important?

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Shannon Wink
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In the months leading up to the massive Papal visit in the fall of 2015, rumors circulated that Philadelphia AirBnb hosts could make thousands of dollars off of the Catholic visitors pouring into the city to catch a glimpse of the pontiff. And the city wanted its cut.

Massive profits for AirBnb hosts didn’t exactly happen the way some expected it to, but the City of Philadelphia still managed to get a rule on the books in summer 2015 that not only legalized the use of services like AirBnb for short-term rentals, but also formalized that they’re subject to the city’s 8.5 percent hotel tax.

Now, state Sen. Larry Farnese, D-Phila., is proposing a bill in Harrisburg that would similarly codify that “the statewide hotel occupancy tax applies to short-term rentals through Airbnb and similar online marketplaces.” (AirBnb already collects and remits the state’s tax, but this move would formalize it.)

So how much has Philly made from the taxing of AirBnb rentals since July 2015? AirBnb is tight-lipped about these things — they haven’t released the figures to Billy Penn — and it’s difficult to calculate because of the way the tax is structured. But we can safely say a tax on AirBnb rentals brought in several million dollars since it was passed in July 2015. That money’s been split between Visit Philadelphia, the Philadelphia Convention and Visitors Bureau and the Convention Center itself.

At the time, Philadelphia became the largest city in America to legalize AirBnb rentals (fun fact: Former Mayor Nutter chairs the tech giant’s mayoral advisory board), and today the company has pushed for collecting taxes from dozens of jurisdictions around the world. AirBnb has worked with cities so that it can pay taxes — as this explains, that’s often “the first step toward gaining broader legal acceptance.”

Before the move, AirBnb rentals were technically illegal in Philadelphia because hotels could only operate in areas zoned for them. The so-called “short-term ordinance” passed City Council during the summer leading up to the Papal visit and went into effect in July 2015. It permitted these short-term rentals providing companies and hosts follow certain conditions, including hosts getting a permit if the listing is rented for 90 days a year or more.

City officials say these “short-term rentals” were always subject to the city’s 8.5 percent hotel tax, but the legislation from 2015 simply made it so that “booking agents,” A.K.A. AirBnb, could collect and remit these taxes on behalf of the operators of the properties.

The problem: The tax payments are lumped in with the rest of what the city earns from its hotel tax, so for now we can only estimate the impact AirBnb has had specifically.

The city’s Hotel Room Rental Tax fund (which includes the Hotel Room Rental Tax, the Hospitality Promotion Tax and the Tourism and Marketing Tax) made $62.7 million by the end of fiscal year 2016, the first full year the tax was formalized. That’s $5.3 million higher than the $57.4 million the fund made the previous fiscal year.

That said, there are extraneous circumstances. For instance, fiscal year 2016 included the September 2015 papal visit. But when you look at the hotel tax revenue on a month-by-month basis, the revenue has increased almost every month since the tax was put into place, as you can see in this chart which plots revenues from fiscal year 2014 through the end of the 2016 calendar year:

(Note about the above chart: Taxes are due on the 15th of each month so taxes collected in one month were likely earned during the previous month.)

In addition, “hotel operators” also pay other taxes — including the Business Income and Receipts Tax, the Net Profits Tax and the Sales, Use, and Hotel Occupancy Tax — that likely brought revenue into the city through AirBnb, as well. Extrapolating AirBnb’s impact on the amount brought in by those taxes would be much more difficult.

But what we can say for certain is: After Philadelphia formalized its tax-collecting relationship with AirBnb, its hotel tax collections increased by several million dollars. And as you can see above, that trend has — so far — continued into fiscal year 2017.