The Pima County assessor has reclassified hundreds of short-term and vacation rental properties as commercial instead of residential, which increases the taxes due. Owners have been surprised by the change.
The city of Tucson is considering a similar reclassification, and has formed a task force to look at the increasingly popular method of renting one’s property by listing it on websites like Airbnb.com.
Taxes and rules must keep up with the changing landscape, especially as technology makes it easier for property owners and would-be renters to connect. But changing a property’s classification from residential to the more expensive commercial without warning places the owners in a position where they have a serious, unexpected expense.
The industry is unregulated, and so far people who’ve listed their homes, guesthouses or rooms as short-term or vacation rentals haven’t paid the same lodging or rental taxes as longer-term landlords. In a story by the Star’s Patrick McNamara, Pima County Assessor Bill Staples said that such rental properties fall under the law as “transient lodging establishments” because they rent for fewer than 30 days at a time.
The Assessor’s Office used advertisements posted on rental websites to identify which property to reclassify. Figuring out how many there are, and who owns them, should be a priority. It’s a matter of fairness.
Now, it’s fair to say that a person who rents out property, whether it’s in his home or a separate location like a casita, should know about the legalities and responsibilities of doing so. Insurance requirements and taxes are part of the cost of doing business.
Sales tax on hotel stays in Tucson, Pima County and Marana is 12 percent. In Oro Valley the tax is 14.5 percent.
Tucson also charges a $2-per-night bed tax.
Last fiscal year the two taxes brought in more than $13.3 million for the city. The county expects to collect more than $6.6 million in hotel taxes this fiscal year.
Additionally, there are legitimate concerns about unfair competition, in that hotels and bed-and-breakfasts must also have licenses and meet health standards — which these short-term rentals don’t.
But the appeal of these short-term and vacation rental sites is that you’re not staying in a large hotel, but in more personal accommodations. It’s not a stretch to think that some property owners may not, at first, understand the full scope of the enterprise.
Yet, as Tucson Mayor Jonathan Rothschild said, “To me, if you’re advertising on one of these online platforms, that means you’re in business.”
Rothschild makes a good point.
The Tucson task force is a good idea, and we suggest Pima County follow the lead and pause the reclassifications until the issue is hashed out and thoughtful recommendations can be put forward.
