KLC and KTIA File Lawsuit Against Airbnb to Force Compliance with Kentucky Law

The Kentucky League of Cities and the Kentucky Travel Industry Association have filed a complaint seeking declaratory judgment to enforce transient room tax legislation passed by the Kentucky General Assembly.

On behalf of its member cities, KLC partnered with the Kentucky Travel Industry Association (KTIA) to initiate the lawsuit, which asks the Franklin Circuit Court to force Airbnb to comply with House Bill 8 in the 2022 legislative session, to collect and remit transient room tax and pay cities back taxes for properties rented in their jurisdiction.

As amended, Kentucky statute authorized local governing bodies, including cities, to impose a transient room tax of up to 3% to provide funds for the operation of its local tourism commission. The statute also authorizes such a local governing body to impose a special transient room tax of up to an additional 1% to renovate or expand a local convention center and, in certain circumstances, pay for the operating expenses of such a center.

Many member cities have enacted such ordinances to benefit local tourism. As an example, the City of Berea, Kentucky, imposed a local transient room tax of 3% of the rent charged on a transient’s occupancy of “any other place in which accommodations are regularly furnished to transients for consideration or by any person that facilitates the rental of the accommodations by brokering, coordinating, or in any other way arranging for the rental of the accommodations.

Sixteen Airbnb-affiliated properties operate within the City of Berea’s city limits, but only one currently remits any Transient Room Tax as required to be paid by Airbnb.

The City of Elizabethtown, Kentucky, enacted Ord. 37-2022, which in its section § 34.082, provides that “[a] transient room tax of 3% is hereby imposed on the rate, rent or other charge for every occupancy of …any other place in which accommodations are regularly furnished to transients for consideration or by any person that facilitates the rental of the accommodations by brokering, coordinating, or in any other way arranging for the rental of accommodations. Regardless of whether the city has entered into an agreement with a third-party online rental company renting or leasing accommodations subject to this subchapter to collect the transient room tax, all persons, firms, organizations, or businesses subject to this subchapter shall remain liable for filing the appropriate return and paying any transient room tax not collected or paid by the third party online rental company.”

Thirty-nine (39) Airbnb-affiliated properties operate within the City of Elizabethtown’s city limits, but only two currently remit any Transient Room Tax as required to be paid by Airbnb.

The City of Murray, Kentucky, enacted Am. Ord. 2022-1835, containing § 96.04 (A), which states that “Effective January 1, 2023, every person, company, corporation or other like or similar persons, groups or organizations providing occupancy …or any other place in which in which accommodations are regularly furnished to transients for consideration or by any person that facilitates the rental of the accommodations by brokering, coordinating, or in any other way arranging for the rental of the accommodations,” shall pay monthly to the Commission a transient room tax of three percent (3%) of the gross rent for every occupancy of a suite, room or rooms charged and collected by them during such monthly periods.”

Seventeen (17) Airbnb-affiliated properties operate within the City of Murray’s city limits, and none of them remit any Transient Room Tax as required to be paid by Airbnb as required by statute.

KLC and KTIA seek judgment from the Court that Airbnb is required to pay all relevant local transient room taxes authorized by statute; a declaration that the transient room tax is enforceable and allows Kentucky cities to collect the taxes from Airbnb under current statute; and a declaration that all relevant Kentucky cities, their tourism boards or commissions, and or other collecting authorities, are entitled to enforce their transient room taxes against Airbnb, by collecting the taxes owed, as well any applicable interest or penalties due and owing by Airbnb but not paid from the time KRS § 91A.390 was amended, and enforceable, on January 1, 2023 until the date of final judgment.