Total hotel tax revenue questioned as counties struggle to identify short-term rentals

Somerset County Treasurer Anthony DeLuca suspected hotel tax payments coming into his office were a bit sparse.

So DeLuca, a retired police detective in his first year in office, took it upon himself to investigate how many short-term rentals were on the market in Somerset County, and which weren’t paying the property tax. 5%.

“When I came to power, I thought, ‘This is not good. We have more (rentals) than that,” DeLuca said.

Over the next few months, DeLuca scoured websites such as Airbnb and Vrbo and found dozens of homes and rooms to rent.

The problem is that the county had no record of them as properties available for rent, and it suspected that the owners had failed to fork out the required tax.

It’s a problem other counties are experiencing, but so far none have followed DeLuca’s lead.

Westmoreland County levies a 5% hotel tax on 98 rental properties, according to Treasurer Jared Squires. Collections average about $2 million per year, with nearly 10% of that revenue coming from third-party short-term booking companies.

This money came from lump sum payments from vendors, with no additional information on who collected the tax and when the sites were rented. Last year, the county received 25 payments totaling nearly $190,000 from these reservation companies.

Through May, Westmoreland has received $125,000 in hotel taxes from short-term rental companies. The county does not track individual payments from third-party booking sites, Squires said.

“I don’t think it’s a huge amount that we’re missing, but we’re not breaking it down. The ability to find it ourselves is next to impossible,” Squires said.

Revenue from hotel tax in Westmoreland County is used primarily to promote tourism. About 60% of tax revenue is donated to Go Laurel Highlands, an agency that promotes tourism in Westmoreland, Fayette and Somerset counties. Formerly known as the Laurel Highlands Visitors Bureau, the agency sets aside a portion of hotel tax revenue collected in Westmoreland County to provide grants to tourist attractions.

Ann Nemanic, executive director of Go Laurel Highlands, estimated that there were between 400 and 500 short-term rentals available in Westmoreland County through private third-party internet booking sites, but it proved difficult to determine the exact numbers.

It is unclear exactly how much revenue the tourism agency missed due to underpayments of hotel tax on these rentals.

“This is a huge problem and needs to be addressed at the state level,” Nemanic said. “We’re working with the counties as best we can, but there’s likely to be money they’re not getting.”

Allegheny County collected $24.8 million of its 7% hotel tax in 2021.

Diana Maize, assistant director of special taxes for Allegheny County Treasurer John Weinstein, said no local investigation has been undertaken to determine whether revenues received from third-party booking companies accurately reflect the actual number of rentals.

“There’s no way to quantify what they’re sending us. It’s like having a moving target,” Maize said.

Legislation pending at the State House could help.

A bill introduced last year would require third-party booking sites to register with the state Department of Revenue. Listings of rental units would be given to county treasurers, according to the proposal.

State Rep. Eric Nelson, R-Hempfield, one of the bill’s co-sponsors, said it’s unclear if the proposal will become law.

“What we’re trying to do is see consistency with online commerce and physical commerce,” Nelson said.

Meanwhile, DeLuca said he scours sites such as Airbnb every day to find new listings for short-term rentals in his county.

Since the beginning of the year, he has identified around 100 landlords who have rented houses and rooms and, in turn, sent them tax bills. He estimated there could be as many as 700 sites across the county.

“We brought in about $24,000 in additional revenue from these short-term rentals,” DeLuca said. “It’s just taking that extra time and looking at things.”

Representatives for Airbnb and Vrbo did not respond to a request for comment.