Airbnb taxes in doubt amid Baker opposition

The tax package was supported by both Airbnb and its competitors in the traditional lodging industry.Yuya Shino/REUTERS/File

A proposal to tax Airbnb.com and other short-term home rentals faces an uncertain future on Beacon Hill after Governor Charlie Baker said he was having second thoughts about the move.

Some supporters said Monday that they still hoped to craft a home-rental tax that Baker might approve. But the Legislature has just a week left on its schedule, putting pressure on lawmakers to move quickly.

Baker said he was sympathetic to complaints from traditional hotels and motels that private home rentals are eating into their business, calling it “a legitimate issue and one that’s worth discussing.”

But not one he is ready to fix with a new tax.

“I’m not interested in raising taxes. I am interested in leveling playing fields,” Baker told reporters Monday. “At this point in time, on this particular issue, those two things seem to be in conflict.”

Earlier in July, Massachusetts Senate leaders unveiled a plan that would require property owners to collect state and local hotel-related taxes, which can total around 15 percent, on short-term rentals through Airbnb and online vacation sites.

The taxes would apply to rentals of private residences that last 31 days or less. Longer rentals would be governed by tenant agreements, similar to traditional apartment rentals, and not subject to the taxes.

Baker had initially said he would support the broadened lodging taxes. But he quickly changed course and said Monday he shouldn’t have endorsed the plan without reading it first.

The governor’s opposition complicated the odds for a tax package that was supported by both Airbnb and its competitors in the traditional lodging industry.

“It would be terrible to let short-term rentals to go yet another year without being taxed,” said Paul Sacco, chief executive of the Massachusetts Lodging Association.

An Airbnb spokeswoman, Crystal Davis, said the company hoped to continue working with lawmakers on the issue. “We remain positive that something can be done for us to pay our fair share of taxes for our hosts and our guest community,” she said.

Senate officials said the tax would generate up to $20 million per year to help raise the state’s Earned Income Tax Credit — a Baker priority — from 23 percent to 28 percent.

But Baker worried that expanding the taxes to all private rentals “would impose burdensome taxes and government bureaucracy on folks who utilize short-term vacation rentals popular in the Commonwealth,” spokesman Billy Pitman said.

Baker also pointed out that the new lodging taxes wouldn’t immediately cover the cost of expanding the tax credit — expected to be about $50 million per year in 2019, its first full year under the Senate plan.

Senate officials had planned to fund the credit by collecting the expanded lodging taxes for two years before paying out the earned income credits. Lawmakers also hoped to generate up to $10 million per year for the tax credit by restricting the full benefit to Massachusetts residents only.

In a statement, Senate president Stan Rosenberg said he was “disappointed” in Baker’s objections but remained hopeful that some compromise might emerge.

“I would be happy to work with him on a solution to get to what Governor Baker and I have agreed we need to do: help working families by continuing to raise the Earned Income Tax Credit,” Rosenberg said.

Airbnb, which was founded in 2008, claims more than 2 million rental listings worldwide. The company has worked with regulators to extend lodging taxes to its service in several states, including Florida and California.

But the company also has clashed with officials who have proposed broader regulation of its service, including a San Francisco law that only allows Airbnb listings from people who have registered with the city.