Hotel tax doesn't check out, B&B owners complain

Ottawa bed and breakfast owners are so maddened by a proposed four per cent hotel tax that the city's finance and economic development has deferred a decision on the matter to next week's council meeting.

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While the Ottawa and Gatineau Hotel Association (OGHA) supports the mandatory tax, which will raise at least $12 million for Ottawa Tourism to promote the capital as a tourist destination, nearly a dozen B&Bs spoke against the plan Tuesday.

They argue they weren't consulted about the new tax, and that administering it would be too onerous for them.

"The burden would be unbelievable. I'd be buried in paperwork for six months to get all this done," said Carol Watters of Australis Guest House. The new tax must be charged on a separate line on a bill, and the funds remitted to the OGHA.

"I really can't see it's going to work," said Watters.

B&B owners also complained they had little warning about the proposal.

"Why has there been no public consultation before passing a new bylaw, and especially when there's a new tax?" asked Angela Keller-Herzog of Angela's B&B.

"Somewhere between Christmas and New Year's there's going to be a contract put in place, and then on Jan. 1 — bedang! — we're going to start collecting? I think this is a little bit break-neck speed."

B&Bs, which the city defines as up to three bedrooms for rent within a residential home, would like to be exempted from the new tax.

Airbnb open to tax, but wants it applied 'evenly'

Mayor Jim Watson sounded as if he might be open to exempting B&Bs, but worried about whether that would mean having to exempt Airbnb from the hotel tax as well — something he doesn't want to do, as the new tax would generate an expected $300,000 from the home rental service.

"I think Airbnb is running a multi-billion business, and they should pay their fair share of taxes because they benefit from the marketing that Ottawa Tourism does," Watson told reporters. "I have more sympathy, obviously for the small B&B operators."

Airbnb has said that it is willing to paying the hotel tax and is working with the city on complying. However, company officials said on background Tuesday that Airbnb wants a system that is "applied evenly." According to one company official, bed and breakfasts sometime use Airbnb themselves to take advantage of its large network of customers.

The city is currently checking into whether it would be legal for the city to exempt B&Bs, but not Airbnb.

Councillors may also look at other measures to help the small businesses, including a longer period of time to implement the new tax, and allowing them to submit the collected funds less frequently.

Replacing voluntary 3% levy

Back in 2004, the local hotel industry introduced a voluntary three per cent "destination marketing fee" on guest rooms, which generates about $8 million to $9 million a year. The money was collected by OGHA and then turned over to Ottawa Tourism to promote the capital as a travel destination.

About half of Ottawa's hotels participated in this program, although those establishments represent 90 per cent of the stock of rooms in the city, according to the report. 

The provincial budget passed earlier this year opens the door to allowing municipalities to impose mandatory hotel taxes, but the regulations were only finalized recently.

The quick implementation date was necessary because the voluntary program expires at the end of this year, but the timing could be tricky for smaller businesses not already participating in the voluntary program.