The City of Owensboro is stepping up efforts to collect transient room taxes from short-term rental platforms such as Airbnb, citing significant revenue losses and fairness concerns. In a move to tighten compliance, City officials discussed amendments to the transient room tax ordinance during a meeting on Tuesday, highlighting enforcement tools and clarifying responsibilities for rental hosts and brokers.
The revisions to Chapter 16, Article III, Division 4 of the Owensboro Municipal Code include updated definitions, registration requirements, and enforcement mechanisms. The ordinance requires entities receiving rental income to remit the transient room tax and holds hosts accountable if brokers such as Airbnb fail to comply.
Owensboro established the transient room tax in 2022, imposing a 4% tax on short-term rentals, while Daviess County Fiscal Court imposed a 6% tax. City of Owensboro Finance Director Angela Waninger explained the City has struggled to collect taxes from Airbnb, which has yet to respond to communication attempts.
“Airbnb hasn’t remitted anything to the City,” Waninger said. “Many hosts assume brokers handle everything, but that’s not happening. This ordinance clarifies responsibilities and gives us tools to ensure compliance.”
The updated ordinance broadens the definition of “rent” to include cleaning fees, pet fees, and other similar charges. City Attorney Mark Pfeifer explained that this measure aims to prevent “disguised rent,” where fees are separated from the rental rate to reduce the taxable amount.
Another key change shifts tax responsibility to the party receiving the rental income, whether it is the broker or the host. While platforms including Expedia and VRBO are compliant, City officials said Airbnb has not entered into an agreement with the City, leaving hosts liable if the broker does not remit taxes.
The ordinance introduces a mandatory annual registration process for all short-term rental hosts, which will be free of charge. Hosts must also file monthly reports on rental activity, even if no income is generated. Failure to register or comply by the March 1, 2025, deadline could result in fines of up to $500.
The Board of Commissioners acknowledged enforcement challenges, including identifying unregistered properties. Waninger noted the City is leveraging software, manual audits, and public tips to track rentals.
“This isn’t about penalizing people,” City Manager Nate Pagan said. “The enforcement measures are in place for habitual offenders, but we hope they will rarely be needed.”
Mark Calitri, president and CEO of Visit Owensboro, highlighted the importance of ensuring fairness and capturing revenue from Airbnb rentals.
“Owensboro is an events town,” Calitri said. “People stay here for sports tournaments, conventions, and economic development activities. We’re creating the demand for these rentals, so it’s only fair that transient room taxes apply to Airbnbs just like hotels.”
Calitri estimated the CVB loses approximately $7,000 monthly – about $84,000 annually – due to noncompliance. He said those funds could be reinvested in events, marketing, and staffing.
Waninger noted the City has identified more than 100 Airbnbs in Owensboro but lacks precise data on their revenue and activity. While some hosts self-report, most do not. Neighboring towns in Kentucky have faced similar challenges, with some involved in ongoing litigation with Airbnb.
The Kentucky League of Cities (KLC) is currently engaged in a lawsuit against Airbnb, arguing that the platform has failed to comply with state laws requiring the collection and remittance of transient room taxes. The lawsuit was filed in 2023 and seeks to enforce House Bill 8, which mandates short-term rental platforms collect these taxes on behalf of hosts and remit them to local governments.
The updated ordinance also addresses scenarios where Airbnb collects taxes but does not remit them to the City. Waninger emphasized that failing to remit taxes could result in legal consequences.
“We’re giving everyone a grace period to register and comply,” she said. “This is about fairness and making sure everyone contributes their fair share.”
The ordinance will be presented for a second reading and vote on December 17. If approved, hosts will be required to register their rentals and comply with tax reporting requirements starting next year.
For more information on registration and compliance, visit the city’s website at Owensboro.org.
