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Up in the Air 

Bend looks to Airbnb for tax revenue

It's a contentious issue—whether or not a 2 percent room tax increase should be added to November ballots.

The bed tax is paid by tourists—not locals—and, if approved, would change the rate from 9 to 11 percent. The tax would help fund the arts, emergency services and Bend's tourism reach. Last week, after months of back-and-forth discussion, city councilors again opted to delay a decision on the tax-rate bump, this time until July 10.

Meanwhile, the city of Bend also is figuring out how to adapt to an emerging business model as it relates to the room-tax debate—the sharing economy; in particular, Airbnb, a site that connects travelers with short-term accommodations. Other similar services, like Getaround (car sharing) and Taskrabbit (help with errands) also are thriving and, in time, no doubt will draw a hard look from local agencies.

Such "sharing" sites, through which homeowners can rent out their homes, were drawn into the debate over increased "bed taxes" when local proprietors began to cry foul: What about them? During last week's city council meeting, the owner of an established vacation rental agency, said the city should look elsewhere for cash before ratcheting up the transient room tax rate on more formal agencies and establishments. She suggested the city was missing out on as much as $300,000 in uncollected room tax dollars from those using services like Aribnb and VRBO (Vacation Rental By Owner).

While city officials question her dollar amount, they agree residents who are profiting from renting rooms should be (and are) subject to the same room tax.

One Bend couple, for example, Mr. and Mrs. Smith (an assumed name; they wished to remain anonymous), make good use of Airbnb. In the past year the Smiths reckon they've earned about $10,000 in supplemental income renting rooms in their house through Airbnb, which claims to operate in over 34,000 cities and 192 countries. During that time the Smiths have paid no room tax to the city of Bend.

It is not because the Smiths are opposed to paying taxes on that income (and Airbnb does submit filings to the IRS), but they view Bend's transient room tax filing process as overwhelming and clunky, especially for those who don't rely on room rentals as a sole source of income. To comply with Bend's room tax would require private residential owners to acquire a business license and submit monthly tax payments. It would require filing multiple documents with the city, including a Transient Room Tax Registration form that asks for the "Name of Establishment." Monthly remittance of room tax payments is required, as is maintenance of a guest log that includes guests' home addresses, license plate numbers, dates of stay and room number.

"I have no problem paying the taxes," Mr. Smith said. "But I'm not going to go way out of my way to do all this [application process]. It should be as streamlined and easy as possible. It would be to their [the city's] benefit."

The Smiths are not alone. A growing number of Bend residents are renting rooms in their homes using services like Airbnb and VRBO, and that means potential room-tax dollars, but many are foregoing the filing process. A quick Airbnb search found more than 160 rentals available on Airbnb in the Bend area.

Should these residents who rent a room once or twice a month be subject to the same transient room tax collection protocol as hotels? The city of Bend, for now, says yes.

"When you start out small, you don't think of yourself as a business owner," said Betsy Tucker, a city accounting technician who oversees the collection of Bend's transient room taxes. "I try to incorporate into the discussion that they're [citizens like the Smiths] running a business, and how can we help you run your business successfully?"

But the city is hoping to get a better grasp on the issue and streamline the process. Tucker reports that the city is currently undertaking a double-pronged auditing process: One audit is checking hotel/motel compliance; the other is focused on vacation rental underreporting aimed at citizens like the Smiths, who may not be complying with local laws. Currently the city has 215 vacation rentals on file, but the number is rapidly increasing.

Other cities have already jumped on the issue. Last year, according to San Francisco's city website, Mayor Ed Lee created the Sharing Economy Working Group, a policy group formed to "take a comprehensive look at the economic benefits, innovative companies and emerging policy issues around the growing 'sharing economy.' " (AirBnB is headquartered in San Francisco.) Some cities, however, are less enthusiastic. New York City has pursued fines against Airbnb hosts who run afoul of the state's lodging laws; more than 2,000 fines were leveled in that city in 2011. In one case, a $2,400 fine was levied against a host who rented his apartment for three nights at $315. In that case, Airbnb took the unprecedented step of hiring an attorney and is defending the host.

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