Court Backs Vacation-Rental Platforms In Tax Dispute

Mar 25, 2020

TALLAHASSEE — Calling the companies “simply conduits,” a divided appeals court Wednesday said Airbnb and similar vacation-rental platforms are not required to collect and send in county tourist-development taxes.

A panel of the 4th District Court of Appeal, in a 2-1 decision, upheld a circuit judge’s ruling in favor of Airbnb, Tripadvisor and HomeAway in a battle with Palm Beach County Tax Collector Anne Gannon over collection of the so-called “bed taxes.”

Counties have the option to impose bed taxes on short-term rentals and use the money for tourism-related purposes. Hotels, for example, collect the taxes on customer bills and remit the money.

But Wednesday’s decision centered on whether the online platforms, which serve as sort of high-tech middlemen between property owners and renters, should also collect and send in taxes. The platforms accept payments from renters and pass along the money to property owners.

The court majority rejected the tax collector’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 seven-page majority decision, written by 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.”

But Judge Robert Gross wrote a dissent that 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.”

The majority, however, disputed that “someone other than one who can grant a possessory interest may ‘receive’ the consideration and, thus, be required to collect and remit” the tax.

“Such an interpretation would implicate a number of intermediaries who ‘receive’ the consideration before the owners, including credit card companies, banks, etc. and require them to collect and remit the (tourist development tax),” Damoorgian wrote.

But Gross blasted that argument in his dissent.

“Avoiding the obvious application of the statutes and ordinances, the majority resorts to a classic piece of interpretive legerdemain,” he wrote. “The majority has come up with absurd applications of the statute as a rationale for not applying the legislation to situations at which the enactments were obviously directed. Yes, funds from appellees’ (the online platforms’) rentals may come to reside for a time with banks and credit card companies, but banks and credit card companies are not parties to the underlying rental transactions; rather they facilitate those transactions.”