Proposed 10% tax on short-term rentals closer to becoming state law

In a move aimed at addressing the pressing issue of affordable housing, state lawmakers are considering giving cities and counties the option of implementing a 10% excise tax on short-term rentals.

The Senate passed the bill in a near-unanimous vote last week. The House Finance Committee in an 8-5 vote on vote passed the bill and it now moves on to a full vote of the House.

The proposed tax, outlined in an amended Senate Bill 5334, would tax the nightly rate on short-term rental lodging made through online platforms like Airbnb and Vrbo.

Under the provisions of the bill, the tax rate could reach up to 10% of the sale, with increments not less than 1%.

The bill’s sponsor, Sen. Liz Lovelett, D-Anacortes, testified to the House Finance Committee Friday that the bill is needed to fund housing for tourism workers who don’t live in the area where they work.

“With the proliferation of short-term rentals in our communities, it became very evident that the very service sector employees that are trying to staff these tourism-dependent businesses were being pushed out of houses that had traditionally been in the long-term rental market,” Lovelett said.

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The bill doesn’t limit the tax to cities with tourism as any city or county can implement the tax.

Counties would have the authority to impose the tax countywide, while cities could implement it within their jurisdictions. But if both a county and a city levy the tax on the same transaction, the city tax would take precedent.

Revenue generated from the tax would be earmarked for specific purposes related to housing initiatives in that area.

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The mayor of Leavenworth, Carl Florea, told the committee his town depends on tourism but 80% of the workers live outside of the city.

“We are very quickly losing our community,” he told lawmakers.

Despite its population of fewer than 2,500, its hotel receipts are the third highest in the state at roughly $4 million per year.

“We make more in our lodging tax than in our sales tax,” he said.

He said the tax could raise “several hundred thousand (dollars)” from the roughly 150 short-term rentals in the city for tourism worker housing.

“It isn’t a huge number, but it’s more (money) than I have right now, and we can start addressing it (housing),” he said.

The bill would require online platforms like Vrbo, which is owned by Seattle-based Expedia, to impose the tax.

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Support for the bill

Brent Ludeman, a lobbyist representing Expedia, told the committee his company was originally against the tax when it was first discussed several years ago, but is now supportive of it.

He cited a push by many cities to restrict the number of short-term rentals as a reason why the company supports the bill despite a potential loss in customers.

“Rather than having those localities ban short-term rentals entirely, we would prefer this pressure relief valve of the tax,” he said.

He said cities can then say they are trying to tackle the problem of worker housing.

There are exemptions within the bill. The excise tax would not apply to the renting of a room in an owner’s primary residence, provided all rented rooms share a common entryway.

Short-term rental platforms would be required to provide a means for owners to attest to meeting these exemption criteria.

Opposition to the bill

Several owners of short-term rentals testified against the bill, saying they will lose customers because they price their units to be lower than hotel rooms.

Arlene Bassett opened an Airbnb in Spokane four years ago to help pay her mortgage. She thinks a tax like this will negatively impact her ability to make money.

“This means I could be required to pay an extra $100 on every $1,000 I charge.”

Bassett added she is retired, 70 years old, and she’s afraid she will lose customers.

“This is a lot of money. This tax would raise prices on our guests, and it benefits the hotel industry over every day Washingtonians and is not the right approach to making housing less affordable,” she said.

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A key aspect of the amended bill is transparency. It mandates that counties or cities imposing the tax publish an annual report detailing how the tax revenue was utilized in the preceding year.

The report must be made available to the public, potentially including online postings on the respective county’s or city’s website.

Matt Markovich often covers the state legislature and public policy for KIRO Newsradio. You can read more of Matt’s stories here. Follow him on X, formerly known as Twitter, or email him here.

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