‘Bed tax’ fight goes to Supreme Court

By Jim Saunders
News Service of Florida

A battle about whether Airbnb and similar vacation-rental platforms are required to collect and send in county tourist-development taxes could be decided by the Florida Supreme Court.

Palm Beach County Tax Collector Anne Gannon is asking justices to take up the issue after a divided appeals court ruled in March that the online companies are not required to handle the so-called “bed taxes,” according to documents posted last Monday on the Supreme Court website.

As is common, an initial notice filed by Gannon’s attorneys did not provide details about the tax collector’s arguments. But she is seeking to have the Supreme Court overturn a ruling by a panel of the 4th District Court of Appeal in favor of Airbnb, Tripadvisor and HomeAway.

The dispute centers on bed taxes that counties may impose on short-term rentals, with the money going to tourism-related purposes. Hotels, for example, collect the taxes on customer bills and remit the money.

But in a 2-1 decision, the appeals-court agreed with the online platforms that they are not subject to the requirement. The platforms accept payments from renters and pass along the money to property owners, serving as sort of middlemen for vacation rentals.

The appeals-court majority on March 25 rejected Gannon’s arguments that the platforms should be considered “dealers” under state law, a description that would require them to collect and remit taxes. The ruling said a dealer is “one who can grant a possessory interest in the property.”

“Based on our … determination that 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 … statutes,” said the decision, written by appeals-court Judge Dorian Damoorgian and joined by Chief Judge Spencer Levine. “Rather, a ‘dealer’ is the owner of the property, or the owner’s agent, who ultimately receives the consideration.”

The appeals court last month denied a request for a rehearing, including a potential rehearing by the full court.

But in a dissenting opinion in March, Judge Robert Gross focused heavily on parts of state law that say the “person receiving the consideration” for a lease or rental is responsible for collecting and remitting the taxes. Citing laws, ordinances and a state administrative rule, he wrote that online platforms receive the rental payments and, as a result, are responsible for handling the taxes.

“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 (tourist development tax) and remit it to the proper taxing authority. Both Airbnb and TripAdvisor qualify as agents who ‘receive rent as the owner’s representative’ within the meaning of (the administrative rule). The companies’ terms of service provide that they will act as payment collection agents to receive funds from customers.”