Short-term rentals in Mission Viejo, including people who rent parts of their homes on sites like Airbnb, do need to collect a lodging tax, city leaders said this week as they moved to “clarify” its transient occupancy tax.
This week, the City Council updated its transient occupancy tax, money collected from hotels and other lodging facilities that is put toward the city’s general revenue. While the tax has always been enforced on hotels, there was some confusion among those who rent their property or part of their property over whether they, too, needed to remit the tax, said Mission Viejo spokesperson Kelly Tokarski.
The council billed the update as a clarification to its existing ordinance, and councilmembers unanimously agreed to it during the Tuesday, Jan. 9 meeting.
“Essentially,” said Tokarski, “this amendment closes the loopholes in the existing code and specifically references short-term rentals.”
“We believe that there are a number of short-term rental properties that are failing to remit transient occupancy tax in accordance with the ordinance,” said Tokarski. “The purpose of amending the ordinance is to further clarify the requirements to eliminate an ambiguity in the fact that the city’s long-standing ordinance does apply to short-term rentals.”
The ordinance was updated to add “online travel company” and “short-term rental unit” to ensure these parties are responsible for collecting the lodging tax. It now underscores that short-term rental properties have the same responsibilities for collection and remittance of the tax to Mission Viejo as hotels, according to the staff report.
The renovated ordinance defines short-term rental units as temporary lodging in hotels, motels and residential units for less than 30 consecutive calendar days.
“This is no way amending or changing the already existing tax rate,” said William Curley, the city attorney. “This is a high-level housekeeping to get our code current. What we had was usable but did not have all the current lingo so this is merely a lingo update. I just do not want anyone panicking that this is a rate change.”
All hotel and motel facilitators in Mission Viejo are required to collect this tax from guests, which is 8% of the room charge.
Mission Viejo has collected $5,700 in this tax from short-term rentals over the past year, said Cheryl Dyas, the director of administrative services. However, she said, that is a “small number.”
The city has an estimated 120-180 residential units being used as short-term rentals, Dyas said, but that amount could be as high as 200, said Mayor Trish Kelley.
“It is money we have been missing out,” said Kelley, “so I am glad that this has been flagged.”
The city, though, does not have an estimate of how much it has missed in collection from short-term rentals, Tokarski said.
Mission Viejo intends to initiate an outreach campaign in the next few months to inform short-term rental property owners of the requirements of the city’s ordinance, Tokarski said.
Some cities, such as Los Angeles, have an agreement directly with short-term rental services like Airbnb and Vrbo to collect the tax directly through these companies. In Mission Viejo, though, owners of these properties are required to pay the tax directly to the city and not through these services.
Mission Viejo, Dyas said, is “looking at better ways to monitor and enforce transient occupancy tax on short-term rentals like those services at this time.”
Mission Viejo is also developing new software to collect the tax from short-term rental facilitators. In collaboration with outside contractors, the software will monitor the tax collected from short-term rentals and assist those who may have trouble figuring out how to submit the payments, said Dyas.