The city of Duluth soon will have a new partner to assist with its tax-collecting duties - Airbnb.
The online booking company and Duluth have signed an agreement that will result in Airbnb collecting and forwarding a 3 percent local lodging tax fee on every transaction it completes within city limits.
At present, Duluth city staff are left to their own devices when it comes to collecting lodging taxes from people renting out their property to guests.
Wayne Parson, Duluth's chief financial officer, said he has a collections person on staff who monitors online property listings and periodically checks to see that lodging taxes are being remitted.
But he freely admits: "It's not the best system, and this agreement should help a lot."
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Airbnb reports that the agreement to collect taxes on behalf of Duluth is the first of its kind in the state of Minnesota. However, that's not to say that the arrangement is unprecedented. Airbnb has more than 370 tax partnerships across the nation, including jurisdictions in 42 states, the District of Columbia and Puerto Rico.
Parson expects the partnership with Airbnb will greatly improve compliance with local tax laws. He said it's difficult for city staff to keep tabs on all the online booking activity, and sometimes property owners unwittingly fail to adhere to the rules.
"It happens," Parson said.
Airbnb aims to begin collecting lodging taxes and remitting the proceeds to the city of Duluth come June 1, as summer tourism begins to ramp up.
"We believe this partnership will unlock significant new revenue for Duluth moving forward," said Laura Spanjian, Midwest policy director for Airbnb, in written press statement.
"We hope this agreement can serve as a model for other Minnesota municipalities looking to take full economic advantage of the sharing economy," she said.
Airbnb reported that in 2017, more than 9,500 people booked stays in Duluth using its service. That made Duluth the third-most-popular destination in the state, behind only Minneapolis and St. Paul.
