Dare County faces challenges collecting occupancy taxes on short-term rentals

By on August 25, 2019

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As the number of short-term vacation rentals listed with online lodging marketplaces continues to grow on the Outer Banks, some local officials are concerned about whether the county is receiving the occupancy tax it is owed.

There are an estimated 3,500 to 5,000 short-term rental homes in Dare County that are listed through platforms such as Airbnb, VRBO and Homeaway, County Tax Collector Becky Huff told the Dare Board of Commissioners at its Aug. 5 meeting.

During a presentation at that meeting, Huff acknowledged that there was no way of knowing how many short-term rentals could be flying under the radar in terms of taxes. “Not a clue,” she said. “People change so many and work with so many different vendors.”

Huff also told the commissioners that, “The listing department has a process where they are able to find a lot of them.” While there is no address provided on the advertisements, she estimated that her department can locate about 75 to 80 percent of them based on location and a photo of the house.

According to the tax department, the occupancy tax rate in Dare County is 6% of gross receipts derived from “the rental of room, lodging, campsite or similar accommodation furnished by any hotel, motel, inn, tourist camp, including private residences and cottages rented to transients.”

That tax does not apply to properties rented for less than 15 days in a calendar year or for 90 or more continuous days to the same person.

Dare County Manager Bobby Outten told the Voice in an interview that the tax department is working hard to ensure the occupancy revenue for such online rentals is being collected. But he acknowledged that it is an inexact science.

He noted that Airbnb collects occupancy tax and remits it to the county in one lump sum, but, “we can’t know if it is remitting all the tax or not.” As for VRBO, that company collects the occupancy tax from renters and remits it to the owners, who then pays it to the county.

A representative for Airbnb told the Voice that, “We’re collecting at the time of booking for each guest that books in North Carolina.” According to data provided by that company, Dare County’s combined Airbnb host income between June 1, 2018 and June 1, 2019 reached $13.9 million and represented roughly 81,000 guests.

At their Aug. 5 meeting, commissioners offered anecdotes about the proliferation of short-term rentals.

“I was talking to two people last week…and out of the nine homes on their street, five are Airbnb,” noted Chairman Bob Woodard.  Commissioner Ervin Bateman told a similar story, saying that one Nags Head resident, who is also a hotel owner, said recently that there were nine Airbnbs on her street on the west side of U.S. 158.

The impact of these short-term rentals has been emerging as a public policy issue. This year, after initiating a town-wide survey to gauge sentiment about them, the Town of Nags Head implemented a registration program for owners and operators of units that are not managed by a real estate broker. The annual registration includes a $25 fee. Short-term rentals for the inaugural year must be registered by Dec. 31, 2019. Beginning in 2020, registration must be completed by Sept. 1 of each year.

As Nags Head tries to get a handle on this sector, some of the other players in the vacation rental industry also believe these operations should be more closely regulated.

Outer Banks Association of Realtors President Jean-Paul Peron said that these kinds of rentals  are not members of his organization. “They are not under our control…and not under the jurisdiction of the [NC] Real Estate Commission,” he said. “All of our members abide by all the rules put forth by the state, as well as the Vacation Rental Act and property management rules and regulations.”

In the meantime, Huff told the commissioners that she believes most of them are trying to play by the rules.

“There will always be some who play the system, but we are trying very hard to make that as minimal as possible…ninety to ninety-two are honest and really want to do the right thing,” she said at the Aug. 5 meeting. Huff added that the county has launched several public awareness campaigns to educate residents of the occupancy tax requirement

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Comments

  • dan

    My wife and I are both public servants. Without Airbnb we simply would not be able to live here, its that simple. If you want to drive public servants out of this community then ban airbnb/vrbo. Then cops, firefighters and teachers will have to leave because they can’t afford their mortgage. The affordable long term rental problem is not our fault, that falls squarely upon the incorporated towns and the county. The local governments need to fix that problem not individual home owners. We chose airbnb specifically because they pay the taxes for us and we wanted to make sure that the taxes are paid on time and correctly. There are plenty of rental companies down here that rent houses for short terms including long weekends.

    Monday, Aug 26 @ 6:02 am
  • Will

    Great point Dan! In the same boat here.

    Monday, Aug 26 @ 2:06 pm
  • Tipper

    Don’t forget us seniors who also would not be able to pay our mortgage if not for Air BNB

    Monday, Aug 26 @ 4:03 pm
  • Steve

    Due to their business practices, house rental companies are driving homeowners to use airb&b and the like

    Monday, Aug 26 @ 6:50 am
  • The Captain

    That Short Term Occupancy Tax Collection problem sounds like a great job for an aggressive Local person. I’m not well versed in the “Airbnb World” but I’m sure people doing it either don’t know all the regs or choose to ignore them. I’m not against it but from what I’ve heard it’s quick cash in our area.

    Monday, Aug 26 @ 7:41 am
  • Jac.E Bent

    You need to make a correction to this article. You wrote that “tax does not apply to properties rented for less than 15 days or for 90 or more continuous days to the same person” – this is misleading because the rule actually reads “rented for less than 15 days in a calendar year” whereas how you have it written seems any stay less than 15 days shouldn’t be charged the tax which is not correct. Please click this link to confirm https://www.darenc.com/departments/tax-department/occupancy-tax.

    Monday, Aug 26 @ 9:29 am
  • Mark Jurkowitz

    Thanks you for pointing that out. It was an oversight and we have corrected it.

    Monday, Aug 26 @ 2:36 pm
  • surf123

    I’d say there is a fair amount of confusion as to who has to pay what and most of it is not dishonest. I don’t care about the collection of the occupancy tax as it keeps it out of the hands of the tourism board, however I do want to see the state sales tax collected and paid on these rentals.

    The rental companies, like every business that has been overtaken by faster and leaner Internet companies, don’t see their pending demise coming. Same holds true for real estate sales. They will fight it to the end, but will lose out no matter what they do.

    Monday, Aug 26 @ 10:21 am
  • Just Beachy

    Most of the occupancy tax goes to the county and towns for police, fire and trash services. After that, it funds beach nourishment. Only a sixth goes to the tourism bureau. For someone who never hesitates to comment on anything tourism or real estate related, you sure don’t know much about either.

    Monday, Aug 26 @ 1:33 pm
  • surf123

    Th 1% for Tourism is of no use. We have too many people here, who are ruining the experience for those of us who choose to live here. The 2% for beach nourishment is an absolute waste of money as it will never stop. The solution is to retreat and always will be. I’ll give you that the other 3% is being used for needed items to a degree though I rarely see any patrols going on other than for speeding.

    Tuesday, Aug 27 @ 10:54 am
  • Jimbo

    While Airbnb does help with the issue of housing affordability here on the OBX, what is being done to fix the root of the problem? It seems to me that the ability for anyone to be able to list their home on Airbnb or other rental sites is artificially inflating the sales price for what would be affordable single family homes. And the residents who are listing on these sites aren’t making a killing, they are simply able to afford to live here. At the same time, these inflated sale prices are deterring locals and young families from purchasing houses due to the disparity between the cost of living and the median household income.

    Wednesday, Aug 28 @ 12:05 pm