Rockville and Gaithersburg will soon be able to impose a lodging tax on short-term rentals like those listed through the online Airbnb marketplace.
A bill that cleared the state legislature, sponsored by freshman Del. Julie Palakovich Carr, a Democrat, allows the municipalities to enact the tax for properties with 10 or less rooms.
The two cities currently tax hotels and other places of lodging of 10 rooms or more at a rate of 2%. Montgomery County taxes hotels at 7%; short-term rentals have had to pay the tax since since 2016.
Neither Rockville nor Gaithersburg officials were sure whether the county and city tax would both apply within each jurisdiction for a total tax of 9%. County spokesman Ohene Gyapong noted that county rules currently prohibit Airbnb within the city limits of Rockville and Gaithersburg. But Palakovich Carr said she thinks the total tax rate will be 9% once the two localities approve the tax.
“That’s my understanding. It’s the same system that is currently in place for the hotel tax on larger hotels,” she said.
Airbnb operates rentals within the boundaries of both cities, and charges an occupancy tax that is typically close to the 7% county tax rate. Airbnb spokeswoman Liz DeBold Fusco said the company collects the tax from consumers on behalf of the hosts through its automatic tax remittance system.
“Airbnb has partnered with over 23,000 jurisdictions globally to reach tax agreements that allow us to collect and remit applicable taxes on behalf of our hosts, including Montgomery County. We hope to work with more communities all over the world to make the tax remittance process seamless for local residents while providing these cities additional revenue,” she wrote in an email.
Rockville and Gaithersburg must first amend their ordinances to reflect the change before they can begin taxing the short-term rentals.
Gaithersburg Mayor Jud Ashman said the City Council has been discussing the issue of taxing short-term rentals for the past four months. At one point, there were about 75 Airbnb rentals in the city.
“When there’s an inauguration or a big even in town, there’s probably more,” he said.
Ashman said the council made the request to Palakovich Carr, a former Rockville City Council member whose legislative district includes Rockville and Gaithersburg. The bill takes effect July 1.
“Essentially this legislation allows us to do what counties have always been doing,” he said.
Gaithersburg City Manager Tony Tomasello said additional revenue generated by the tax would be between $5,000 and $10,000 a year.
“But this is really just an estimate at this time,” he emphasized.
Sean Sedam, a spokesman for the City of Rockville, said the city does not currently keep track of short-term rentals. The council will take up the issue of taxation on hotels this summer, he said.
Revenue from the city’s hotel tax has grown from more than $624,000 in fiscal 2009 to more than $1 million in fiscal 2018, Sedam said. The revenue goes toward the city’s general fund.
Rockville Mayor Bridget Donnell Newton said the city’s approach to regulating Airbnb rentals has yet to be worked out among council members.
“Sometimes we know they’re there, but they’re not registered. I see it as an equalizer because we do tax the hotel rooms. And therefore, it’s another way of helping to keep what we want in the city good,” she said.
Kelly Groff, CEO of the tourism marketing agency Visit Montgomery, said the additional tax won’t have much impact on the tourism economy since the county has already been taxing Airbnb for the last few years.
She said it is “only natural” that Rockville and Gaithersburg would want to collect revenue as the county does.
“It’s an industry that is part of the overall lodging industry in the county, and they should be recognized as hosts that take care of our visitors,” she said.
Dan Schere can be reached at Daniel.schere@moco360.media
