After a lengthy process to set up registry and try to collect a tourism tax from people renting out space at their home, through services such as Airbnb or VRBO hosts, county supervisors are now considering whether they should exempt all of those and all bed-and-breakfasts from the tax.
Meanwhile the county’s tourism agency, Visit Loudoun, is instead pushing to expand that tax on short-term residential rentals to apply to more hosts.
The Transient Occupancy Tax is a tax on overnight stays such as at hotels or bed-and-breakfasts. Travelers staying overnight in Loudoun pay a 7-percent tax if they are staying in lodging that accommodates four or more people.
Supervisor Ron A. Meyer Jr. (R-Broad Run) had asked the county to look at exempting any business with room for fewer than 25 people—which a county report found would exempt every short-term residential rental, and, likely, most bed-and-breakfast operations. According to data collected by Visit Loudoun, there is no short-term residential rental in the county with space for more than 18.
Visit Loudoun tallies 430 properties with those short-term rentals in the county, 377 of which are outside the towns, which collect their own hotel tax. Of those, 208 sleep fewer than four and are exempt from the room tax. Exempting the rest, county staff members estimate, would forego almost $236,000 in tax revenue. If the bed and breakfast properties are added to the exemption, the county would skip almost $408,000 in tax revenue.
But Visit Loudoun President and CEO Beth Erickson said, in fact, the county should go the other way—levying the tax on anyone who rents a room in Loudoun.
“The majority of the short-term residential rentals currently would fall below that four-occupant threshold and, in my opinion, if you are renting out one room, one bed, for payment, collecting and remitting transient occupancy tax is part of doing that business,” Erickson told the board’s finance committee Monday. “You are operating in that sphere.”
County Chairwoman Phyllis J. Randall (D-At Large) pointed out that in the past, Erickson’s arguments had been that the tax was meant to capture people operating like a business without paying the tax, not individuals renting out a bedroom.
“You’re now saying they’re in the game, too, and before you weren’t,” Randall said.
Erickson said it’s “an evolution in thought” brought on by a year and a half of studying Loudoun’s market. She said many of the regular, professionally run rentals in Loudoun are only one unit. She suggested different criteria to separate them out, such as how often they rent.
Finance committee Chairman Matthew F. Letourneau (R-Dulles) said he’d rather not burden “someone who’s literally just got a bedroom they rent out once in a while.”
“Those are the folks that I think I have a little heartburn creating anything, really, for them to have to do,” Letourneau said.
Loudoun County now requires people operating a short-term residential rental to register annually with the county government, part of an ongoing attempt to count, tax and regulate the historically mostly unregulated market. There is a $500 penalty for renting out a property without registering, up to $5,000 total. Violating the registration requirement would also prohibit registration for one or two years, while violating more than three state or local laws and regulations would prohibit registration for one year.
Those businesses are also required to pay the county’s business, professional, and occupational license tax. Those renting out fewer than seven bedrooms and showing less than $4,000 annual gross receipts are exempt. With seven or more bedrooms and up to $200,000 gross receipts, businesses pay a $30 license fee, and above that, 23 cents per $100 of gross receipts.