Several Airbnb and self-contracted-stay hosts may be violating state and city law for not reporting their Transient Room Tax income, according to the City of Owensboro officials. This is leading to inadequate funding for major projects such as the indoor sports facility.
Angela Waninger, City of Owensboro Director of Finance and Support Services, said businesses new to short-term rentals through Airbnb typically have difficulty reporting. She noted that other short-term rental services such as VRBO are already reporting directly to the City of Owensboro for their necessary taxes.
“We haven’t gotten any payments from Airbnb. VRBO does make payments to the City. Whoever collects the revenue should be remitting the taxes. So whether it’s Airbnb, VRBO, or the owner, whoever’s collecting that money should be remitting this tax,” Waninger said.
Waninger said that if a property is dual-listed through Airbnb and another platform, the host must collect Airbnb’s fees and submit them to the City.
The transient room tax previously only applied to hotels and motels, but the Kentucky legislature amended the state law in to say that, effective January 2023, it also applies to property rental companies such as Airbnb and Vrbo (for temporary stays that do not exceed 30 days).
Waninger and Visit Owensboro President Mark Calitri said that the people not submitting their taxes violate Kentucky and local law. Both say confusion may arise when Airbnb reports they “collect and remit local taxes on the behalf of hosts.” However, in an active lawsuit, the Kentucky League of Cities alleges Airbnb is not.
“Any person violating any provision of the City’s ordinance may be subject to a fine of not more than $500 for each offense and/or imprisonment for not more than 30 days. It should be noted that every month for which a report was not filed constitutes a separate offense,” Waninger said previously.
In May, Calitri said that the area Airbnbs reported roughly 60% occupancy. He noted that as hotel rates and occupancy increase, the city will see a rise in the Airbnb market locally.
Given that the transient room tax is being used to pay for large projects — the $19 million bond for the indoor sports facility, for example — Waninger said the more properties that start submitting their taxes, the more the debt service of that bond will increase.
“The way I envision this working would be that this process continues. The bonds are for 20 years, and when we get to the end of the 20 years, the debt is paid. We’ll still be collecting transit room tax and I envision that it would pay the Your Community Vision Fund back for the years it was supplanted,” Waninger said.
Waninger said any renter using Airbnb should complete their transient room tax form. According to Waninger, paperwork would be due on the last day of the month, and the previous month would be reported. Should someone not report their taxes, Waninger said they could face legal action.
Waninger said that if any renter has questions, they should call the City’s finance department at 270-687-8534.
