The Montgomery County Council approved Wednesday two measures aimed at bringing additional revenue into the county’s coffers and that also attempt to address evolving issues over e-cigarettes’ risk to public health and whether temporary room and home rental services like Airbnb should pay taxes to the county.
The council approved a 30 percent excise tax on wholesale distributors of e-cigarettes, which is expected to generate $1.5 million to $2.5 million in annual revenue if signed into law by County Executive Ike Leggett. The measure was sponsored by council member Tom Hucker, who said it would “update our tax code to keep up with a growing and rapidly evolving industry.”
The measure drew heated opposition at a public hearing earlier this month from Bruce Bereano of the Maryland Association of Tobacco and Candy Distributors. He said only the state has the legal authority to tax tobacco-related products..
“I know you all are going to pass this bill and we’re going to see each other in court,” Bereano said.
Local e-cigarette retailers also opposed the new tax, while anti-smoking and public health advocates supported it at the public hearing.
“If your goal is to keep kids from initiation into this product, this will help,” Eric Gally, a spokesman for the American Cancer Society, said.
A national survey by the Centers of Disease Control released in April found that e-cigarette use among middle school and high school students tripled over the past year, prompting warnings from public health officials.
The council also voted to expand the application of a 7 percent tax on hotel room rentals to rentals offered on websites such as Airbnb and HomeAway. Technically, homeowners advertising rooms or homes on these sites are in violation of the county’s zoning law because they don’t have licenses to rent them on a temporary basis.
Despite this, the council passed the legislation, expecting to alter the zoning ordinance to legalize the services in the future. Council member Hans Riemer said Airbnb is already collecting and remitting tax payments to jurisdictions that have imposed taxes on the online rental service.
He said that not taxing such services puts hotels that are paying the tax at a disadvantage.
“I don’t think we need to outlaw Airbnb,” Riemer said. “It’s the wave of the future and we do need to resolve the issues that it presents.”
Council President George Leventhal said changing the zoning ordinance to allow temporary rentals will be complex and involve “traditional issues” surrounding transient lodging in residential neighborhoods.
The new tax is expected to generate about $230,000 annually, according to the county’s estimates. The measure proceeds to the county executive for final approval.
