Tourism to see boost in tax revenue

Through passage of legislation
Thu, 07/11/2019 - 6:15pm
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Block Island’s tourism district will see an increase in revenue that will be derived from taxes generated by online hosting platforms, such as Airbnb. Per the recently passed 2020 state budget, the tourism district will receive the tax revenue for the calendar year beginning on July 1, 2019. 

“We’re super pleased with the result,” said Jessica Willi, Executive Director of the Block Island Tourism Council, noting the tourism districts’ efforts in educating legislators about the tax formula breakdown and importance of the revenue. “That money was supposedly going to the Rhode Island Commerce Corporation, for their marketing efforts. But it was hard to follow where it was going. So it’s definitely a win.”

The win for the Block Island tourism district is due to passage of Rhode Island’s fiscal year 2020 budget on June 22, which includes language noting that hosting platform revenue will now be listed under the same distribution umbrella as the hotel tax. Gov. Gina Raimondo signed the budget into law on July 5. 

Tax revenue generated through hosting platform sales, such as Airbnb, was previously distributed with 25 percent going to each municipality, and 75 percent being allocated to the Rhode Island Commerce Corporation.

Block Island’s tourism district is now entitled to 45 percent of hotel tax revenue, which Willi said equates to about a $30,000 increase in revenue for the summer season. Under the hotel tax umbrella, the town receives 25 percent; the Rhode Island Commerce Corporation collects 25 percent; and the Greater Providence-Warwick Convention and Visitors’ Bureau nets five percent.

Willi said the estimate is that hosting platforms will generate about $400,000 in revenue in 2020, with the six tourism districts expected to receive about $200,000 via the distribution formula.

The language included in the $10 billion state budget, under the heading of Hotel Tax Distribution, states that: article 5, relating to taxes, revenues and fees, “aligns the distribution of the hosting platform portion of the State Hotel tax with the existing formula for the standard hotel room portion of the tax. There is no fiscal impact to municipalities, however, the Rhode Island Commerce Corporation allocation will be reduced slightly.”

“This legislation will help us do our job better — to promote Block Island,” said Willi. “So it’s great news.”

She also said it’s important to note that this is not a new tax to the consumer. “It’s putting the money into a new pail,” she said. “What it means is an additional $30,000 restored to our budget moving forward. This is restoring some of the funding that we have lost over the years. It’s hard to do a job when your budget gets cut into constantly.”

“Every year they try to change the distribution formula,” Willi said of state legislators. “Back when the hotel tax was enacted it was done so with the support of the hotels. That’s because that money went to the region. Now we’re down to 45 percent of the total five percent hotel tax.”

In 2014, passage of the budget cut the district’s tax revenue from 47 percent to 42 percent. Four years later, the districts’ revenue was raised to 45 percent.

If someone rents a room in Rhode Island they pay a seven percent sales tax, one percent local hotel tax that goes to that town, and a five percent statewide hotel tax, for a total of 13 percent. The 45 percent received by the tourism district comes from the five percent hotel tax.

Willi said the business from hosting platforms “is growing,” and if the legislation had not passed, “we would be down about $40,000 next year.” She said in 2014/2015 “there were maybe five properties on Block Island” that booked through a hosting platform like Airbnb. “Now, there are about 30 properties on the island.”