Calling on all California Hosts - No on CA SB 584

[Tony88]

CA SB 584 Short-Term Rental Tax Law will be taken up on the California Senate Floor soon. The bill would, beginning January 1, 2025, impose a tax on the occupancy of a short-term rental in California at the rate of 15% of the rental price of the short-term rental on top of other taxes and assessments.   The bill would increase the overall tax and assessment rate for short-term rental guests visiting counties that already have a TOT tax.  This could add 27%-$30% or greater on taxes at booking time.

[Mike-And-Jane0]

@Tony88 Does this new tax also apply to hotels?

[Tony88]

No this tax does not include Hotels and B&Bs.  Only for vacation rentals.

[Beachview-Realty0]

@Tony88 Received a notice the bill got pulled by the author the night before assembly was to vote. Converted to a 2-year bill and becomes eligible to be heard again in Jan 2024. Have you heard anything more about this, specifically why it was pulled so last minute?

[Nur785]

@Mike-And-Jane0 

the issue on the floor is "labor workforce housing" meaning people who work minimum wage jobs in certain counties in CA cannot afford to live in those counties, which is true. 

This bill is one of the several different solutions offered to it. The hotel chain lobbyists are working diligently to make sure the burden falls on the STRS and does not result on raised taxes across the board in the hospitality industry. 

This bill specifically says rooms that are not "lodge, hotel, motel, inn" etc. This is a double edged sword. If the bill passes, the law specifically recognizes the STRS are different from hotels which would open the door for litigation of TOTs the hotels have to collect and highly likely would make STRs exempt from TOT. 

Basically it's a bill of the hotel chains saying I want to have my cake and eat it too. 

The current support for the bill after the 3rd reading is at 4 legislators. It's highly unlikely to pass. Oh, and it would only apply to bookings less than 30 days. 

This is probably more than you wanted to know 🙂 

[Mike-And-Jane0]

@Nur785 Thanks for this. Always good to know what other localities are planning in case it comes to the UK.

[Nur785]

@Tony88We have occupancy taxes in NJ same as the hotels and the total taxes come to something like 21% of the rate on top of which adds the service fees etc. Guess what people understand that they pay the same tax at a hotel and still want to come to New York. 

Right now taxes in your listing seem to be at %13. This going up to 20-21% is not the end of the world. People who pay 13% will pay the 20%. It's also the right thing to do. You'll live and you'll continue to get bookings and good on CA senate.

[Tony88]

This proposed 15% tax only applies to vacation rental owners.   Hotels and B&Bs are excluded from this added tax.   California is singling out vacation rentals.  If they want to be fair about it, then tax the whole accommodation industry in California.

[Ana2038]

@Nur785 , the 15% tax the State of California would impose on all vacation rentals, not hotels or motels, would be in addition to the existing TOTs paid to local governments. I just learned about this bill only last week by another Airbnb Superhost. I was able to submit a letter to the state stating my opposition to this bill.  Now, would potential guest(s) be willing to pay a total tax that exceeds what they would pay for a hotel? 🤔 

[Nur785]

@Ana2038

Yes, I found out recently from a bill tracking newsletter, then read Limon's explanation and the controversy around it. 

I found out that there are also several markups of the bill on the floor, 1  that suggests lowering the TOT or TIA to mitigate the new tax (this would go along with a cap on how much tax could be so it does not reach 30)   which I think is not a smart way to go about it. 2. that suggests a more even distribution of the burden on tourism industry. Something like 4.25% increase all businesses, which also is not a good markup of the bill.   

Having said that, I agree that it should be applied to all beds equally including hotels and the burden should not be on STRs and that should be an amendment proposal.  The current 13-15% across all hospitality can take a hit a few more percentage point without it making a difference.While conventional business theories put inflection point of taxes on consumer behavior at %15, I think NY, NJ, MA shows this is not the case. 

My point is the fight against this bill would be more successful as an amendment of hospitality tax increases across the board than fighting against the bill completely. Anyway, that's what I would lobby for if I were a CA host. 

In any case, I am sorry if I offended. Tracking senate bills is sort of my day job. 

[Tony88]

Item 1 reducing the local TOT to accommodate this 15% tax would be devastating to the counties.  They rely on that tax to support tourism and fund infrastructure projects.   

[Dan14537]

https://calmatters.org/politics/capitol/2023/05/airbnb-tax-california-housing/

[Dan14537]

The real problem of course is that we all compete in a "market" with hotels.  If we pay 15% extra and they don't we are not competitive and the only place it will come from is our pocket.  I completely disagree with the premise that we are all headed to 20% plus taxes.  There is no nexus between what we do and the housing shortage.   Read the 2022 Milken Institute report that the CalMatters reporter referred to.  You need to tell your stories to the Senate, you have to call, that has the most weight.

It sure seems like they picked on us because we are little guys and don't have a big powerful lobby like the hoteliers.

[Dan14537]

And we all already pay TOT, the 15% is on top of local TOT to be clear.  Thank the small operator carve out language in the bill is bs.  They make it seem like 100k of gross and you are out but you are not, everyone e on a "platform" is covered.

https://www.sonomacountygazette.com/sonoma-county-news/new-state-tax-could-price-sonoma-county-out-o...

[Nur785]

@Dan14537 

This bill would make it so you are NOT in market with hotels. Once a law recognizes that STRS and hotels are distinctly separate, the TOT that applies on STRs would have no legal leg to stand on. It would probably take a few months of litigation to make TOT not apply to STRs, which is one of the reasons this bill does not have strong support. 

You are absolutely correct the hotel chain lobbyists are pulling the chains on this and it is despicable, but the solution is not crying out against this bill but rather lobbying for a solution. Our 21% was an example of having higher occupancy taxes and still thriving, not a prediction of the future. I don't know whether everyone is heading that way or not, I only know that high efficiency markets can carry a higher tax rate based on new research of consumer inflection point on taxes. 

But also, I am sincerely puzzled why an obscure bill that has only 4 legislators on record for support at the 3rd reading is the source of such controversy. 

Yes, In the unlikely event (but it could still happen) this bill passed, it would make taxes on STRs higher for a few months, but it would level down to the same rates with hotels after some litigation and the consequences of it would be much worse, which is why this is a really silly bill and not really far sighted.