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SHORT-TERM RENTALS COMPONENT
We have broken this plan into three parts, to more clearly outline the plan.
Lodging Marketplace Tax Collections
A "Lodging Marketplace" is defined as "an entity that provides a platform through which an unaffiliated third party offers to rent a short-term rental to an occupant and collects the consideration for the rental from the occupant". This means online platforms such as Airbnb, HomeAway, VRBO, etc. but keeping in mind the definition of short-term rental (outlined below) is a residential dwelling - not hotel, motel, or resort rooms- so it only covers online platforms renting out residential dwellings.
The Lodging Marketplace (i.e. Airbnb) must:
- Be licensed by the state DOR in order to rent residential dwellings in our state
- Collect and remit state and county and other sales taxes (such as Premier Resort Area Tax or Special District Taxes) on short-term rentals to the DOR. Note: Airbnb already has an agreement with the state to do this starting July 1, 2017, so this not only makes this a legal requirement, but would also begin to apply to other online platforms renting residential dwellings.
- Collect and remit municipal room taxes, for those with a room tax, on short-term rentals. Note: this is new and will reduce the confusion from Airbnb advising their hosts that they are collecting all taxes, when this does not include room tax unless a separate agreement was negotiated between Airbnb and the municipality. Currently, only Madison, Green Bay, and the unique room tax in Milwaukee are known to be covered. Now, instead of allowing Airbnb and other Lodging Marketplaces to selectively choose which large municipalities to negotiate with to collect and remit room tax, they would have to negotiate with all sized municipalities - generating more room tax revenue for tourism promotion and tourism development. Municipalities may wish to pursue an opportunity in their negotiations with the Lodging Marketplace to ensure they will receive basic documentation on their sales to ensure proper amounts are being remitted, similar to what lodging properties currently remit.
- Notify the owner of the rental property that the lodging marketplace has collected and forwarded to DOR the sales and room taxes described above, so that they know this has been provided.
"Short-Term Rentals" Requirements
A "short-term rental" is defined as "a residential dwelling that is offered for rent for a fee and for fewer than 29 consecutive days". To further clarify, a "residential dwelling" is "any building, structure, or part of the building or structure, that is used or intended to be used as a home, residence, or sleeping place by one person or by two or more persons maintaining a common household, to the exclusion of all others".
Any person who maintains, manages, or operates a short-term rental, for more than 10 nights each year
(Note: this is the same duration for Bed & Breakfast licensing requirements)
must:
- Obtain from DATCP (Dept. of Agriculture, Trade and Consumer Protection) a license as a tourist rooming house. Note: this means they must apply, pay fees, and pass inspections the same as others classified as tourist rooming houses.
- Obtain from a municipality or county a license for renting these dwellings if it is required by ordinance for tourist rooming houses
These requirements, when added to the new tax collections by the Lodging Marketplaces, will help to create a more level competitive playing field with other licensed lodging rentals. In addition, if the short-term rental by-passes using a Lodging Marketplace, as they must be licensed as a tourist rooming house, they then clearly are obligated to collect and remit all sales and room taxes on their own.
Municipality Requirements
In the portion negotiated by the Realtors Association, not the WH&LA, the following changes are planned:
- A municipality CANNOT prohibit the rental of a residential dwelling for 7 consecutive days or longer. However, they CAN prohibit rentals less than 7 days. This relates to prohibition only, and does not relate to general restrictions, however the language does state that any current ordinance that is inconsistent with the prohibition limitation would no longer apply. There may still be some differing interpretations on how this may apply to local zoning requirements, which may be clarified moving forward.
- A municipality CAN limit the total number of days within a year (365 consecutive days) that a residential dwelling can be rented out, as long as the number is 180 days or more. The municipality CANNOT specify which portion of the year these limited rental days can occur, but they CAN require the limitation to cover a consecutive day period, starting with the first day it is rented out. For example, if a short-term rental is rented out for a week starting May 1st, and the municipality restricts these rentals to 180 consecutive days, they cannot rent it out after approximately November 1 (until May 1 of the next year), regardless of how many nights they rent it out in that timeframe.
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