When Airbnb agreed last year to pay South Dakota taxes, I guesstimated they’d add $200,000 to our public coffers. With my usual conservatism, I was under by almost a factor of 3:
The vacation rental website remitted $568,000 in tax revenue during first year of tax agreement with state of South Dakota.
…Through the agreement, which went into effect Sept.1, 2017, Airbnb began collecting and remitting the state sales tax, municipal sales tax, municipal gross receipts tax and tourism tax on all eligible bookings.
…AirBnB said its South Dakota hosts welcomed approximately 41,000 guest arrivals in 2017, a 141 percent increase over the year before. A typical host earns $5,700 a year [Jeremy Fugleberg, “AirBnB Stays Brought $568,000 in Tax Revenue to South Dakota Last Year,” that Sioux Falls paper, 2018.11.09].
Figure 9% (4.5% state, 1% to 2% municipal sales, 1% municipal gross receipts, 1.5% tourism), and that’s $6.3 million in Airbnb earnings. Divide that by the $5,700 a year average, and that’s over 1,100 Airbnb hosts in our fair state.
If half of that money goes to the state general fund, that Airbnb revenue would help raise every K-12 teacher’s pay in the state by about $30.
“tax agreement with state of South Dakota.”
Why was a specific agreement necessary? Did they argue that they were different somehow from hotels, motels, inns, etc, and therefore exempt? Is every new form of doing business that is created going to require a special agreement?
Business is business is business. All these entities trying to carve out exemptions is tiresome.
Someone, maybe Axios, had an article today about big box stores basically blackmailing smaller towns for tax breaks. The stores say their revenue is down so their property taxes should be too. They threaten that if those taxes are not drastically dropped or even removed all together, they’ll move to another town that will. That’s even more tiresome.
Debbo,
The agreement is that Airbnb collects and submits the taxes on behalf of the property owners. The owners were already obligated to collect and submit taxes, but by being done by Airbnb it ensures the taxes are actually collected and submitted.
This is similar to the use taxes on purchases over the internet. Every single purchase made over the internet to be delivered in South Dakota is subject to use tax on the total amount including shipping, but who is actually filing a return for use tax? Now, marketplaces like Amazon are collecting and submitting them. More and more states are requiring internet sellers to collect and submit sales taxes regardless of physical presence. Why did people think that their purchases over the internet were tax free? Same difference.
This might be the more significant state headline that doesn’t become a headline other than at this site. SD is asleep at the wheel. zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
I hope Airbnb will continue to provide these figures so we can use it as an additional measure of our state’s appeal to tourists and other visitors. It would be interesting to see how many Airbnb stays are folks in-state coming from, say, Aberdeen to Sioux Falls for meetings.
Curious: will Airbnb face additional regs at the behest of the hotel lobby (hee hee!)? Is Airbnb taking a significant bite out of the hotel market?
Thanks Angela.
This is why libbies should not do the budget math. French Math is not the way to guess at things. Leave the math to the professionals.
If anything, you should have me doing the budget math because I will provide safe conservative estimates.