Dear WH&LA CVB and Chamber Members:
As you know, Governor Walker signed the State Budget Bill into law as Wisconsin Act 59 on September 21, with numerous issues addressed with varying results.
The good news is that components relating to leveling the playing field between residential dwelling rentals and other lodging rentals supported by the lodging industry were approved, although some components addressing municipality restrictions added by the Realtors were included that we did not pursue.
As an update on what the Short-Term Rentals components cover, here is a brief overview followed by a new legal interpretation:
SHORT-TERM RENTALS - NEW REQUIREMENTS!
As summarized previously, there were three primary components to this proposal, with the last one pursued by the Realtor's Association, not the WH&LA. The Governor did not veto any of the three components, so all will now become law. The three components are: 1) Lodging Marketplace Requirements 2) Short-Term Rental Requirements 3) Municipality Requirements. We are going to frame this all differently from the last communication, to help outline how this will impact our industry more clearly. First we will start with important definitions:
- "Short-Term Rental" means a residential dwelling that is offered for rent for a fee and for fewer than 29 consecutive days
- "Residential Dwelling" means 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
- "Lodging Marketplace" means 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
Now, for what the new law says:
- Any person who maintains, manages, or operates a "Short-Term Rental" for more than 10 nights each year must: 1) obtain a license for the property to operate as a "tourist rooming house" by DATCP - which includes passing inspections and paying a licensing fee, and 2) obtain a license for conducting such rentals from the municipality or county, if such a license or permit exists.
- Any "Lodging Marketplace" must: 1) register as such with the state Dept. of Revenue in order to conduct short-term rentals in Wisconsin 2) collect and remit state sales tax, county sales tax, and applicable Special Baseball District, Local Exposition District, and Premier Resort Area Taxes to the state Dept. of Revenue for short-term rental sales 3) collect and remit Local Room Tax to municipalities for their sales of short-term rentals in municipalities with such a tax and 4) advise the residential dwelling property owner that such remittances have occurred
- A municipality: 1) CAN prohibit short-term rentals of less than 7 consecutive days duration 2)CAN limit the total number of consecutive days the short-term rental can occur within, as long as the total is not less than 180 days, starting with the date of the first rental night 3) CanNOT prohibit short-term rentals of 7 consecutive days or longer 4) Can NOT continue any part of an ordinance that is inconsistent with the above
- The Room Tax collection requirement for a Lodging Marketplace applies as soon as a Lodging Marketplace registers with the DOR
What else applies that is not spelled out in this legislation:
- Any property licensed as a Tourist Rooming House is required to collect/remit state and county sales taxes, Baseball District taxes, Exposition District taxes, Premier Resort Area Taxes that apply, and municipal Room Tax in effect. If a Lodging Marketplace does not collect and remit for them, they would be responsible to do so the same as other tourist rooming houses.
- Other than what is restricted above, a municipality retains their other rights.
- A Lodging Marketplace is only obligated to collect and remit taxes on "short-term rentals" as defined above (i.e. A residential dwelling), not on all types of rentals.
- All the components go into effect immediately, as no delay was incorporated into the budget language.
NEW: Short-Term Rentals Clarification.
After verifying a recent new interpretation with legal counsel, we can now share that municipalities with a room tax should no longer need or likely even want to negotiate with Lodging Marketplaces (i.e. Airbnb or HomeAway) for them to collect and remit room tax for residential dwellings being rented out as "short-term rentals".
The change in statutory language in the budget provides the authorization for a Lodging Marketplace (which must be registered with the DOR) to collect and remit municipal room tax, which in turn submits them to similar requirements, disclosures, potential audits, as others remitting room tax payments. They are only required to collect and remit room tax for residential dwellings being rented out as short-term stays, however. The requirement does not include other types of rentals that may be rented through the Lodging Marketplace.
Why is this important? Most agreements Airbnb creates allows them to keep confidential what properties are being rented out and the amount of sales revenue generated by each, which enables rentals that are not licensed or locally permitted to remain unknown. If a municipality avoids such an agreement, the Lodging Marketplace is simply subject to the same reporting requirements and potential auditing of records that other properties are subject to.
Best,
Trisha
