By Jimmy Vielkind 

People booking vacation rentals in New York on sites like Airbnb Inc. could soon start paying sales taxes that home-sharing companies would collect under a proposal included in Gov. Andrew Cuomo's $193 billion budget.

Aides to the Democratic governor say the proposal could generate an additional $10 million for the state in the fiscal year that starts April 1, and $18 million in subsequent years. Roughly the same amount of money would also flow to local governments around the state, which also levy their own surcharges on top of the state's 4% sales tax.

The proposal was embraced by the group representing the state's county governments, but it could revive a broader debate about how home-sharing companies are regulated in the state, lawmakers said, which is fueled by different concerns in different parts of the state.

"I think it's now opportune for us to have this larger conversation," said state Sen. James Skoufis, a Democrat from Orange County, who favors changing state law to allow for short-term rentals in multifamily buildings.

Mr. Cuomo's proposal doesn't address registration or change the state's multiple-dwelling law, which prevents someone from renting an apartment in a building with three or more units for fewer than 30 days unless the apartment's tenant is also present.

Freeman Klopott, a spokesman for the state Budget Division, said vacation rentals have always been subject to local taxes but there hasn't been an easy way to collect them. He said Mr. Cuomo's proposal "fixes the problem" by having the online platform -- like Airbnb or Expedia Group Inc.'s Vrbo -- collect taxes instead of hosts.

Airbnb began collecting certain taxes in some jurisdictions in 2014, and says it has remitted $2.6 billion to governments around the world from inception to September of last year. But its practices vary across states: The company collects state sales and occupancy taxes in Tennessee and New Jersey, for example. But it only remits occupancy taxes to some counties in other states like New York and Ohio.

Vrbo representatives didn't respond to a request for comment. Alex Dagg, the Northeast policy director for Airbnb, welcomed Mr. Cuomo's proposal and said the company has supported New York legislation with tax collection provisions since 2016.

"We're pleased the state has recognized the important role short-term rentals can play in New York's recovery and are hopeful that 2021 will be the year New York joins dozens of other states in passing sensible short-term rental rules that protect economic opportunity and drive tourism forward," she said in a statement.

Airbnb has voluntary agreements with 34 of New York's 62 counties, including Westchester, but not New York City or the counties on Long Island. A Westchester County spokeswoman said the county receives around $20,000 a month under its agreement with Airbnb. A company spokesman said it distributed $3.3 million to New York counties in 2019.

One of the biggest beneficiaries was Essex County, which is sparsely populated but includes tourist draws like Lake Placid and the High Peaks of the Adirondack Mountains. The county had a 3% occupancy tax in 2019, and collected roughly $690,000, according to James McKenna, president of the Lake Placid-based Regional Office of Sustainable Tourism.

Essex County has a 4% sales tax, and Mr. McKenna estimated Mr. Cuomo's proposal could bring in $1 million of additional revenue.

There are roughly 500 properties being rented online in and around Lake Placid, said Craig Randall, the village mayor. It adopted a law last year that set occupancy limits on vacation rentals and required owners to register their properties.

Mr. Randall also operated a small motel for more than 40 years, and said he supported the governor's proposal on the grounds of fairness.

"Many of the people who do this refer to it as their little business," he said.

It is a different story in New York City, where many elected officials have expressed concern that short-term rentals of apartments, including rent-stabilized units, can create upward pressure on rents.

Both hotel owners and the union representing hotel workers have pushed for laws that would require Airbnb to share listing data with officials, and to levy fines against people who violate the multiple-dwelling law.

Vijay Dandapani, president and chief executive of the Hotel Association of New York City, which represents hundreds of hoteliers, said his organization didn't object to Mr. Cuomo's proposal because it didn't make any changes to the multiple-dwelling law.

In addition to sales tax, the governor's budget language would let New York City collect a $1.50-per-room nightly surcharge on hotel stays. Representatives for Mayor Bill de Blasio, a Democrat, said he would review the proposal and his priority would be on preventing illegal short-term rentals.

City Hall representatives also said Mr. Cuomo could raise more funds by increasing taxes on the wealthy as he grapples with a $10.2 billion deficit in the coming fiscal year. The governor has proposed a $1.5 billion income-tax increase on people reporting more than $5 million of income.

State Assemblywoman Linda Rosenthal, a Democrat from Manhattan's Upper West Side, has sponsored previous laws cracking down on home-sharing applications and said she was leery of giving any official blessing of their operations -- even if it meant $10 million of additional revenue.

"Perhaps outside of the city it makes more sense, where vacation rentals are less likely to be illegal," she said.

Write to Jimmy Vielkind at Jimmy.Vielkind@wsj.com

 

(END) Dow Jones Newswires

January 25, 2021 08:16 ET (13:16 GMT)

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