Hotel tax revenue totals questioned as counties struggle to identify short-term rentals

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

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

“When I came into office, I thought, ‘This isn’t right. We have more (rentals) than this,’ ” DeLuca said.

Over the next several months, DeLuca scoured internet sites such as Airbnb and Vrbo and found dozens of homes and rooms listed for rent.

Trouble is, the county had no record of them as properties available to rent, and he suspected the owners hadn’t been forking over the required tax.

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

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

That money came in lump-sum payments from vendors, with no additional information as to who collected the tax and when the sites were rented. The county received 25 payments totaling nearly $190,000 from those booking companies last year.

Through May, Westmoreland was paid $125,000 in hotel taxes from the short-term rental companies. The county doesn’t track individual payments from third-party booking sites, Squires said.

“I don’t think it’s a tremendous amount we’re missing, but we don’t break it down. The ability to track it down ourselves is practically impossible,” Squires said.

Hotel tax revenue in Westmoreland County is primarily used to promote tourism. About 60% of the tax revenue is turned over 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 some of the hotel tax revenue collected in Westmoreland County to award grants to tourist attractions.

Go Laurel Highlands Executive Director Ann Nemanic estimated there are between 400 to 500 short-term rentals available in Westmoreland County through private third-party internet booking sites, but determining exact numbers has proved difficult.

It’s unclear just how much revenue the tourism agency has missed out on through underpayments of the hotel tax from those rentals.

“It’s a massive problem and needs to be addressed at the state level,” Nemanic said. “We are working with the counties the best we can, but it’s likely there is money out there they are not receiving.”

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

Diana Maize, assistant manager for special taxes for Allegheny County Treasurer John Weinstein, said no local investigation has been undertaken to determine if revenue received from third-party booking companies accurately reflects the true number of rentals.

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

Legislation pending in the state House could help.

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

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

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

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

Since the start of the year, he has identified about 100 property owners who have rented homes and rooms and, in turn, sent them tax bills. He estimated there could be as many as 700 sites throughout the county.

“We’ve 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 from Airbnb and Vrbo did not respond to a request for comment.