City Hall

Dallas Has Hundreds of Airbnb Hosts. Two of Them Pay Their Taxes.

Back in March, The Dallas Morning News introduced us to Pam Mueller. Mueller, we learned, is a mild-mannered M Streets resident who has taken to renting out the other side of her small duplex on Airbnb, the short-term rental website that has, along with Uber, become synonymous with the "sharing economy." "It's more fun and it's actually more lucrative," Mueller told us on Friday, explaining her move away from long-term tenants. She charges $85 per night and brings in as much as $1,500 per month, not bad for a one-bedroom, one-bath apartment.

We also learned that Mueller is a sucker. The article didn't explicitly say so, of course. But it does point out that she pays the hotel-occupancy tax, the 13-percent levy the state and city tack onto the price of a stay at "any building in which members of the public obtain sleeping accommodations for consideration," which pretty clearly applies to Airbnb stays. What makes Mueller a sucker rather than merely a conscientious and law-abiding hotelier is this: Local Airbnb hosts almost universally ignore local hotel taxes and suffer no negative consequences.

On Airbnb right now, there are about 700 listings in the city of Dallas proper going for an average of $105 per night. According to city spokeswoman Sana Syed, three of those properties have registered with the city and only two have paid taxes, averaging a combined $282.10 monthly tax collection since last October. The rest of the Dallas properties on Airbnb, assuming they are indeed being used as advertised, are theoretically subject to a $500 penalty for failing to collect taxes or file reports, but Syed says the city hasn't issued any fines.

Mueller doesn't consider herself a fool, even if the hundreds of other Airbnb landlords in Dallas are getting away with not paying their taxes. "The contract or whatever the agreement says you're responsible for local and state and whatever taxes," she says. She did ask her accountant if she really had to pay them. He insisted that she did, which she's been doing ever since. "I do a short-term rental, and that's the law."

It's hard to quantify exactly how much in hotel taxes Dallas is foregoing, as there's no way to tell how frequently Airbnb properties are booked, but assuming the rest of the properties are comparable in price and frequency of usage to the two we have tax-collection data for, then the city is missing out on about $99,000 per month, or $1.2 million per year. That's probably a bit of an overstatement, as those hosts who go to the trouble of registering with the city are probably more serious than the average Airbnb-er, but the actual number isn't small, and it will likely continue to grow as Airbnb continues to expand in Dallas.
Not that this comes as a surprise to city officials. Four years ago this month, the city auditor's office released a report concluding that Dallas "does not currently have processes and procedures in place that specifically address short-term vacation rentals. As a result, it is unlikely that short-term vacation rental properties operating in the City are registered with the City and paying Hotel Occupancy Taxes." The report also promised that the auditor and city attorney's office were researching ways to address the issue, but that memo seems to have been both the beginning and end of the city's efforts to better regulate short-term rentals.

Justin Bragiel, general counsel at the Texas Hotel & Lodging Association, says the lack of enforcement doesn't come from lack of will on the part of cities. "The problem has been, at least from my perspective, that the cities all want to go after the places ... but they don't have the manpower. It's hard to track them down." Austin, which has about 8,000 Airbnb hosts, began regulating short-term rentals several years ago and has been fairly proactive compared with other cities about collecting taxes, but it, too, has struggled with enforcement, Bragiel says. His association pushed a bill in the 2015 legislative session that would have required sites like Airbnb and Austin-based HomeAway to collect hosts' taxpayer identification numbers so cities and the state would at least be able to identify who was renting out their properties, thus aiding tax-collection efforts, but the measure died.

The obvious way to ensure that hotel taxes are collected is to have Airbnb do the collecting, as it does in Portland and San Francisco. But although Airbnb said it was "grateful for the opportunity" to begin collecting tourist taxes in Paris, it typically only does so when forced to. In Portland, for example, the taxing agreement came only after a lengthy standoff between the company and the city, something that seems unlikely here, unless and until Airbnb rentals are sufficiently numerous and concentrated that they piss off entire neighborhoods. (Airbnb did not respond to a request seeking comment.)

Mueller, bless her heart, will continue to pay her taxes. Meanwhile, hundreds of others will continue not to. If this continues, the Dallas Convention and Visitors Bureau, which relies heavily on hotel-occupancy taxes, might have to find other ways to fund its top-notch promotional videos.
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Eric Nicholson
Contact: Eric Nicholson