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Consider authorizing the Treasurer-Tax Collector-County Clerk to sign a Voluntary Collection Agreement (VCA) with short term rental online booking service providers that are deemed appropriate for the facilitation of Transient Occupancy Tax (TOT) collections
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The County Treasurer-Tax Collector-County Clerk (TTCCC) recommends that the Board consider authorizing the Treasurer-Tax Collector-County Clerk to sign a Voluntary Collection Agreement (VCA) with short term rental online booking service providers that are deemed appropriate for the facilitation of Transient Occupancy Tax (TOT) collections.
SUMMARY
In the unincorporated areas of Solano County, short-term rentals (less than 30 days) require the lodging operator or owner (“host”) to register for a County Business License. Hosts are also required to collect TOT, also known as "hotel tax" or "bed tax" and related assessments. The TTCCC is responsible for administering the TOT program.
Vacation rentals listed on websites such as Airbnb have been difficult to regulate with regard to tax collection. In other jurisdictions, taxing authorities have negotiated with short term rental service providers to include TOT in their collection process in order to better ensure that all operators/owners are collecting and remitting required TOT. The TTCCC would like to negotiate a VCA with online booking service providers, such as Airbnb Inc., the largest online vacation rental listing website. Under this agreement, the online service provider will collect and remit TOT to the TTCCC on behalf of hosts who use their platform to rent their properties. A sample version of the contract is attached. (Attachment A). The finalized agreement, and any other VCA’s entered into will be reviewed by counsel before acceptance. The TTCCC is requesting the authority to sign VCA with short term rental online booking service providers as they become available.
FINANCIAL IMPACT:
In accordance with Article II of Chapter 11 of the Solano County Code, a TOT rate of 5% is levied on all individuals meeting the criteria of a short term renter as described in said ordinance. The use of a VCA for the collection provides an efficient means of collecting TOT, but it does not alter the applicability of the TOT or the rate of the levy in any way.
It is anticipated that there will be no cost to the County for signing a VCA. All TOT collections made by online booking service providers will be passed through to the County.
The costs associated with preparing the agenda item are nominal and absorbed by the department’s FY2019/20 Adopted Budget.
DISCUSSION:
As vacation rentals have become increasingly popular, online platforms that allow guests to book lodgings directly on the internet have become prevalent. Many hosts use online platforms for listings and collect the required TOT manually and remit it to the County. However, many hosts may not know of their obligation under County Code to obtain a County Business License and collect TOT. Some hosts may be intentionally avoiding applying for a business license and the ensuing TOT collection responsibilities. Hosts who do not obtain a business license and collect TOT have an unfair advantage over those who are complying with the requirements and short-change the County of assessments due. All else equal, an unlicensed operator may be able to rent their property at a rate 5-6% lower than a licensed operator. Licensed hosts, who abide by the rules, have been understandably frustrated by this unfair advantage.
Resource Management is working with a consulting firm to identify all short-term vacation rental operators in the unincorporated area. Notices have begun to be sent out to the operators informing them of their obligations under County Codes.
The TTCCC will be negotiating with Airbnb to reach consensus on the collection agreement. The agreement not only ensures a level playing field, but also greatly eases the administrative burden for the County and individual hosts who choose to operate through Airbnb, since Airbnb will file all required reports and pay the TOT. Airbnb has been working with taxing jurisdictions to reach agreements to collect required taxes from their lodging operators. In California, Airbnb has recently agreed to collect TOT in Humboldt, Marin, Nevada, San Francisco, Santa Cruz, Sonoma, San Luis Obispo, and Tuolumne Counties as well as several small and mid-sized cities.
The authorization to accept TOT payment from online booking service providers is dependent upon the adoption of the proposed amendments to the Article II of Chapter 11 of the Solano County Code. The proposed amendment to the ordinance is introduced on August 27, 2019 and is anticipated to be adopted on September 10, 2019.
ALTERNATIVES:
The Board could choose not to delegate authority to sign VCA contracts. This is not recommended as it could delay the implementation of an efficient TOT collection process. The result of which would be likely be to incur substantial implementation costs while providing no discernable benefit to the county.
OTHER AGENCY INVOLVEMENT:
County Counsel was consulted in the review of the agreement. Resource Management was consulted and is working with the TTCCC to identify online short-term vacation rental service providers and individual operators to facilitate further VCA’s and compliance with County Codes.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION