Taxing in Seattle: City council adopts short-term rental tax

UPDATE: GeekWire reports the Seattle City Council narrowly rejected the head tax. For now.

As expected, the Seattle City Council has approved a tax on short-term rentals, as the Seattle Times reports. 

The Seattle City Council voted Monday to tax operators of short-term rentals, such as those listed on Airbnb.

Beginning in 2019, the city will impose taxes of $14 per night for entire homes and $8 per night for rooms.

In addition to paying for the city to set up and administer the tax, the proceeds will be used to support community-initiated development projects and create affordable housing, according to the ordinance.

A companion regulatory bill was referred back to committee. GeekWire reports,

The tax is part of a set of regulations designed to prevent property owners from operating Airbnbs and other short-term rentals as if they were hotels — part of a broader effort to ensure an adequate supply of long-term rental stock for the city’s permanent residents….

The regulatory component that was separated from the tax would limit Airbnb hosts to no more than two units each and require them to obtain special licenses. The remaining regulations will be discussed in committee.

Airbnb has been working with the city to come up with a set of regulations that let homeowners earn extra cash by renting out their properties on a short-term basis, while keeping as much long-term rental stock on the housing market as possible.

Meanwhile, regarding another tax tied to the city’s homelessness and housing affordability challenges, the Puget Sound Business Journal reports business opposition to a proposed head tax continues

A group of 91 business owners signed a letter sent to the Seattle City Council opposing the proposed employee hours tax.

Under the ordinance proposed in October by councilmembers members Mike O’Brien and Kristen Harris-Talley, companies grossing more than $5 million per year would pay 4.8 cents per hour per employee, or about $100 per employee each year

Seattle-area business leaders including Washington Federal Chairman Roy Whitehead, Pho Cyclo Cafe owner and Ethnic Business Coalition Executive Director Taylor Hoang, Key Bank Market President Carol Nelson and Ivar’s President Bob Donegan argue the tax would burden the business community by adding to already “significant increases in business taxes, fees and utility rates” passed in the last three years.

The PSBJ reprints the letter, available at the link above. Here’s a sample.

We need a compassionate and effective approach to solving homelessness. 

This proposed tax on jobs is not that, and comes on top of significant increases in business taxes, fees and utility rates that the Council has adopted in the last three years. In 2018, Seattle businesses will contribute a record amount of taxes – nearly 60 percent of the city’s total general fund budget. Your recent actions have increased the cost of running businesses, increased costs for customers, and resulted in thinner profit margins across many industries. These realities and your actions threaten the viability of many long-time Seattle businesses. 

As we’ve said, what happens in Seattle often has regional and statewide consequences. Before this is over, the Tax Foundation may have to extend its list.