Taxation of Short Term Residential Rental Units

Year: 
2016

Background

As British Columbians continue to embrace the sharing economy, short term residential rental companies, such as Airbnb and Vacation Rental by Owner (VRBO), and Online Travel Agents (OTAs) such as booking.com are gaining a larger presence across British Columbia.  Currently, these companies or “Booking Agents” do not fall under any of the regulatory, legal, taxation, health and safety or insurance laws of traditional accommodation providers. 

Provincial and Municipal Resort Destination Taxes

While these online platforms have the potential to be valuable conduits for bringing visitors to British Columbia and bolstering the tourism industry, there needs to be further management of this emerging sector. Currently, these commercial transactions are not generating the tax revenue they should.

The size of this segment of the sharing economy has been growing at a rapid pace over last four years.  There are an estimated 10,000-plus units province-wide that are currently unregulated and not contributing to the B.C. tax base.

Because these transactions are private, there is no accurate estimation on the amount of tax revenue lost.  Conservative estimates suggest more than $16 million dollars in general tax revenue and upwards of $3 million in the Municipal and Regional Destination Tax (MRDT) is being overlooked.  This impacts both the province as a whole and, specifically, those communities that rely on MRDT marketing dollars to help boost their local economies. Consequently, accommodation providers, retailers, restaurants and bars, transportation providers and other sectors of the visitor economy are all affected. 

In 2013, British Columbia’s hotels generated $572 million in tax revenue for the Province and an additional $294 million for municipal governments.  Revenues would be greatly augmented if private accommodation providers were taxed similarly.

Currently, with these on-line platforms, the onus of tax compliance is on the owners, managers who rent out the space.  However, at the 2015 Tourism Industry Conference in Vancouver, Airbnb publically acknowledged that there should be a regulatory requirement to collect taxes to contribute to the visitor economy and that they are supportive of the efficient collection of tourist and/or hotel taxes in jurisdictions that have such taxes.

THE CHAMBER RECOMMENDS:

That the Provincial Government:

  1. Ensure that appropriate PST and applicable MRDT be collected and remitted at the point of purchase of room nights on short term residential rentals; and

  2. Ensure that all operators, managers and/or booking agents of 4 or more rooms be subject to collection and remission of PST and applicable MRDT taxes.

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