Come Feb. 1, Airbnb will assess and collect an 8.5 percent hotel tax on all Fayette County Airbnb stays.
The Lexington-Fayette Urban County Government and Airbnb have been in negotiations for more than a year over the collection of the Fayette County portion of the hotel and motel tax. In the fall, the state and Airbnb announced the web-based short-term rental company would collect the 7 percent state taxes on all Kentucky Airbnb stays beginning Oct. 1.
According to data provided by Airbnb, Kentucky homeowners earned $10.2 million in 2016 from Airbnb stays. Lexington had more than 1,500 guest stays, which generated $1.8 million in revenue to hosts in 2016.
Airbnb says based on the previous 12 months, the local hotel taxes on Airbnb stays should generate at least $240,000 annually. That money will be split between the city’s tourism bureau, VisitLex and the Lexington Convention Center. The city recently increased its hotel and motel tax to 8.5 percent so it could generate additional money to pay for a proposed expansion of the convention center. Final cost estimates have not yet been released, but it’s likely that renovation and expansion will top $230 million.
Ben Breit, a spokesman for Airbnb, said it’s likely that the local hotel and motel taxes generated from Airbnb stays will be more than $240,000.
“We have experienced 100 percent growth in the Lexington market,” Breit said. “That’s typical of many major university towns.”
Many brick-and--mortar hotels have also argued that internet-based short-term rental companies have an unfair advantage. Local and state taxes are not added to those bills, making them cheaper than hotels and motels. Trying to get individual Airbnb operators to collect and assess the the local tax was also a headache. In February 2017, city officials said there were at least 375 Fayette County homes and apartments for rent on Airbnb but only 17 appeared to be paying the 8.5 percent hotel tax. Under the agreement, Airbnb will collect and assess the taxes from guests.
“This agreement ensures that the city is taxing Airbnb in the same way it taxes local hotels,” said Bill O’Mara, the city’s finance commissioner. “The revenue goes to VisitLex and Lexington Center, which promote local tourism and help fuel our economy.”
Airbnb officials have said the company is still working with other Kentucky local governments to collect and remit local lodging taxes. It it still working to ink a similar deal with Louisville, by far the largest Airbnb market in Kentucky. In 2016, 43,000 guests generated $6.2 million for Airbnb hosts there, according to previously released figures.