January 31, 2019

Lodgers tax bill would plug Airbnb loophole

Book a hotel room in Silver City and you will probably find a 5 percent lodgers tax on your bill. But not if you book a casita on Airbnb.com.

A loophole in New Mexico law means many vacation rentals are exempt from the tax that local governments charge on stays at hotels and bed-and-breakfast inns.

State lawmakers this year aim to close that loophole, which cities and hotel operators argue would only be fair as websites like Airbnb become increasingly popular among travelers in a state where tourism is a big business. But it may also add to the cost of some visitors’ New Mexico getaways.

The rise of websites like Airbnb has upended much of how governments regulate housing and the tourism industry.

Travelers can go online to rent a room or a whole house from a property owner in whatever place they plan to visit.

Airbnb said it booked about 366,000 guests in New Mexico during 2018.

But short-term rentals marketed to tourists have come under scrutiny in some cities where housing is hard to find and residents are squeezed out of certain neighborhoods.

Taxes pose a whole other issue.

State law says local governments can charge a lodgers tax on room charges at hotels and bed-and-breakfast inns.

Anyone renting fewer than three rooms or properties, though, is exempt. That means anyone renting just a spare room, a two-room casita or a yurt does not necessarily have to collect the lodgers tax.

Senate Bill 106 would scrap that exemption.

The Legislature passed a similar measure back in 2017 with broad bipartisan support, but Gov. Susana Martinez vetoed it along with a string of other tax proposals. Writing to lawmakers, Martinez argued that tourism is a flourishing industry in New Mexico and that short-term rentals help bring more people to the state.

While the exemption may have applied to relatively few people in the past, legislative aides say tax revenue for local governments in New Mexico has likely taken a hit as websites like Airbnb have grown in popularity.

And local governments have been wondering how to respond.

“It’s definitely growing,” said Philip San Filippo, director of economic development for the city of Las Cruces.

New Mexico’s second-biggest city still has plenty of business travelers who stick to hotels. But San Filippo said he is noticing more alternatives popping up.

The New Mexico Hospitality Association, which represents hotels and has backed the measure, commissioned a study in 2017 that found more than 9,000 short-term rental rooms around the state.

While local governments have stood to miss out on revenue under the exemption, hoteliers contend it is simply unfair that websites arranging vacation rentals do not have to charge the same taxes as companies selling rooms in hotels or motels.

“The biggest concern we have is just making sure these stay on the same level playing field as our hotels,” he said.

Airbnb has already reached agreements with several municipalities to collect the lodgers tax, including Santa Fe, Taos, Ruidoso and Albuquerque, tacking local taxes on to the bill when customers staying in those cities pay through the website.

But these arrangements leave out some communities in the state that are popular with tourists, such as parts of Santa Fe County, Silver City and Truth or Consequences. It also leaves out the state’s second-biggest city, Las Cruces.

And other websites have not forged such arrangements.

“Without the bill, we have a patchwork,” said Sen. John Sapien, a Democrat from Corrales and the bill’s sponsor.

The House Taxation and Revenue Committee voted Wednesday to send Senate Bill 106 to the full chamber. If the House approves the bill, it would go to Gov. Michelle Lujan Grisham’s desk.