Anyone renting an Airbnb listing in the nation's capital will have to start paying a four-per-cent hotel tax starting today.
The tax revenue will flow into municipal coffers.
The deal to collect and remit the accommodation tax marks only the second such tax agreement that the online platform has finalized in Canada.
Airbnb already collects and remits an accommodation levy in Quebec that the company says totalled $2.8 million in fees to the province over the first six months of its tax agreement.
The online rental platform says the City of Ottawa could have received about $850,000 in tax revenue last year if a deal had been in place to collect the levy from 2,700 hosts.
However, city officials have previously said that figure was inflated by the Canada150 celebrations in 2017 that drew more visitors to Ottawa.
Steve Ball of the Ottawa Gatineau Hotel Association, previously told OBJ that he’s happy Airbnb has agreed to the tax, although he said hoteliers are still looking for assurances that the company is paying its fair share of corporate taxes and that its hosts are paying HST and tax on the extra income they generate from renting out rooms.
“This is a toe in the water for levelling the playing field,” he said in May.
Impact on Canadian hotels
Newly released documents to Canada's finance minister suggest traditional hotels in two of Canada's biggest cities have not fared badly as they face rising competition from online platforms like Airbnb.
The April 18 memo to Finance Minister Bill Morneau says that average hotel occupancy rates in Vancouver and Toronto were higher than Airbnb listings between 2015 and 2017.
Officials estimated that Airbnb's share of total demand for rooms in the two cities roughly doubled since 2015. And while hotel occupancy rates didn't decline over the same period, "it is possible they could have risen more than they actually did" if Airbnb and other platforms weren't around.
But "despite the rising occupancy rates," Morneau was told in the briefing note obtained by The Canadian Press under the access to information law that the hotel industry still sees an unlevel playing field with Airbnb "as there is no tax" on the service.
Pressure from domestic businesses had been building on the Trudeau government to apply sales taxes to online services providers like Airbnb and Netflix when Morneau was provided a breakdown on the situation between hotels and short-term rentals.
Any recommendations to Morneau have been withheld from release because officials say it is sensitive ministerial advice.
In April, a Liberal-dominated Commons committee urged the federal government to make online service providers based outside the country collect and remit sales taxes as part of a series of recommendations to help Canada's small businesses compete online.
The platforms themselves have told federal officials they are open to applying sales taxes, but the Liberals have shied away from implementing the idea so far.