By Lisa Sievers
Special Contributor
In the discussion regarding short-term rental regulation in the City of Dallas, one important point has not been well addressed — Hotel and Occupancy Tax (HOT).
What are HOT taxes and why should we care about them?
HOT taxes are collected to directly promote tourism and the convention/hotel industry. In Dallas, 3.5 percent of the taxes go to support museums and cultural institutions via the City’s Office of Arts and Culture, 29.1 percent goes to VisitDallas to promote Dallas as a convention and visitor destination, and 67.4 percent goes to the Kay Bailey Hutchinson Convention Center.
A vibrant cultural scene is very important in drawing visitors and new businesses to Dallas. Visited the Dallas Museum of Art? Seen a show at the Majestic Theater? Been awed by the music at the Morton H. Meyerson Symphony Center? Then you’ve seen your HOT taxes at work. We all reap the rewards from the collection and use of HOT taxes.
The City of Dallas has noted that up to September 2020, 250 hotels had registered for HOT and will provide $40 million in revenue. As of September 2020, about 700 short-term rentals had registered, providing about $1 million in revenue.
The city projects that there are 2,161 short-term rental properties as of December 2020. Why haven’t all short-term rentals registered?
The answer is complicated and twofold: The primary culprit appears to be confusion regarding the city’s complex MuniRevs registration/collection website as well as an assumption that Dallas City taxes, along with Texas State taxes, were already being collected and submitted automatically by short-term rental platforms such as Airbnb and VRBO.
The Dallas Short-Term Rental Alliance, a group of over 400 short-term rental operators and community stakeholders has taken an active role in creating awareness of registration and HOT payments among their host membership.
“We have been working with the city and short-term rental owners/operators to drive registration for HOT taxes,” said Shelby Fletcher of the DSTRA Leadership Committee. “Since October last year, we have held four well-attended educational webinars which have helped increase compliance numbers”.
Leaving Real Money on The Table
The State of Texas has already reached an agreement with several commercial platforms (such as Airbnb, VRBO, and HomeAway) to automatically pay the 6 percent State HOT tax directly into their coffers. In 2018, the State of Texas collected $24 million In HOT tax from the Airbnb platform only. The City of Dallas collects an additional 7 percent HOT tax as well as a 2 percent Tourism Public Improvement District fee in some areas.
The important point here is actually the NUMBER of short-term rentals — and this is where it gets interesting.
The city says there are 2,161 short-term rentals in Dallas. Airdna.co provides vacation rental data and they say there are 3,672 active short-term rentals in Dallas. Another study recently presented to the Dallas City Council said there were 4,100 — maybe even 5,000 — short-term rentals.
Let’s do the math. Checking Airdna.co again for average monthly revenue per short-term rental, that’s $1,625 x 12 months x 7 percent HOT tax. Depending on whose numbers are used, that’s between $3 million on the low end and $6.8 million on the high end for Dallas HOT tax collection.
NBC Nightly News reports vacation rentals are selling out as travel rebounds in 2021. VRBO says fewer than half of their homes are available for July and that they’ve had the strongest start in 25 years. Travelers are choosing homes over hotels. The future looks bright for the travel business!
Not only do Airbnb and other platforms already have agreements in place with the state, but also with several other Texas cities such as Plano and McKinney, whereby they automatically calculate and deposit the HOT tax directly into city accounts. Along with HOT collection, the platforms also offer cities a Law Enforcement Portal to report bad actors as well as a 24/7 neighborhood hotline.
As the cultural jewels of our city continue to struggle to survive during the pandemic, maybe we should be asking the Dallas City Council why several million dollars in potential HOT revenue are being left on the table?
Lisa Sievers has lived in East Dallas for over 30 years. She is an interior designer, having founded her small business 25 years ago. She and her husband own and operate two short-term rentals in East Dallas for which they have over 750 5-Star reviews.
