(The Center Square) – The two-year legal feud over who collects and remits Florida “bed taxes” generated by vacation rentals has been put to bed.
The Florida Supreme Court has declined to hear Palm Beach County Tax Collector Anne Gannon’s appeal of a lower court ruling that property owners, not online vacation rental platforms, are responsible for paying sales and tourist-development taxes (TDTs), or “bed taxes.”
The decision, issued Monday without elaboration, is a victory for Airbnb, TripAdvisor, HomeAway and other digital platforms in Florida’s $31 billion short-term vacation rental industry.
In a 2015 agreement with the Florida Department of Revenue, online platforms can arrange to collect taxes voluntarily with individual counties. Hotels are required to collect sales taxes and TDTs on customer bills and remit the money.
Gannon argued in March before a three-justice panel of the state’s 4th District Court of Appeals that digital platforms are “dealers” under state law and, therefore, required to remit taxes.
The court, however, determined in a 2-1 decision that a dealer is “one who can grant a possessory interest in the property,” which only owners can do.
“The companies are simply conduits and do not have any possessory interests in the properties, the companies are not ‘dealers’ as contemplated under the (county) ordinance and the (state) statutes,” said the majority opinion.
Judge Robert Gross wrote in dissent that online platforms actually receive the rental payments so they should be responsible for remitting sales taxes and TDTs.
“The impact of these statutes, ordinances, and rule is crystal clear,” Gross wrote. “The law focuses on that ‘magic moment’ when a person comes into possession of a rental payment, which triggers the obligation of that person to collect the (TDT) and remit it to the proper taxing authority. Both Airbnb and TripAdvisor qualify as agents who ‘receive rent as the owner’s representative’ … The companies’ terms of service provide that they will act as payment collection agents to receive funds from customers.”
Gannon went to the 4th District Court of Appeals after 15th Circuit Judge James Nutt ruled in January 2019 that online services do not own the properties owners rent on their sites, so they should not be responsible collecting taxes.
That ruling was cited weeks later by 12th Circuit Court Judge Edward Nicholas in dismissing a lawsuit by Manatee County Tax Collector Ken Burton, who argued the platforms should be responsible, just like hoteliers, because of difficulties in collecting taxes from vacation rental homeowners.
In a brief filed in July at the Supreme Court, Gannon’s attorneys emphasized those same difficulties and the importance of TDT money to the county.
“While the coronavirus pandemic has shut down the industry along with most of the state’s economy, we should be confident that the industry will recover as the state’s economy opens back up,” the brief said. “At the same time, local governments will have a pressing need for tax revenue.”
Palm Beach County called for a “statutory interpretation,” placing the responsibility with the businesses, not the homeowners.
“As is clear,” the brief said, “this case has far-reaching effects on a large number of people across the state, on every county government in it, and on the tourism industry that is so important to our state.”
Attorneys representing Airbnb and other platforms cited the previous rulings and said the ultimate arbiters should be the Florida Legislature, not the courts.
“The 4th District simply held – correctly – that the companies did not fall within the class of persons who had TDT obligations,” they argued. “If the Legislature wants to attach TDT liability to platforms like those operated by the companies, it is free to make that choice.”