$60M: Myrtle, North Myrtle and Surfside Beach will get a share of big Airbnb settlement
The towns of Myrtle Beach, North Myrtle Beach and Surfside Beach are among more than a dozen South Carolina tourist destinations that are on the verge of a payday thanks to a settlement with vacation rental giant Airbnb, which failed to collect millions in tourism taxes owed to the communities.
Airbnb has agreed to pay $60 million to settle the lawsuit brought by 16 communities, which will receive varying amounts depending how much short-term rental revenue is generated within their borders. The towns and cities range from capital city Columbia to Charleston, the state’s largest city, to smaller tourist hot spots like the town of Hilton Head and Myrtle Beach.
David Barnes, an attorney with Thurmond Kirchner and Timbes, which is handling the case on behalf of the communities, confirmed the settlement last week when he visited the town of Port Royal, another town that joined the original lawsuit after it was filed in April 2021.
Eventually, 16 communities banded together to take on Airbnb and other online vacation rental companies such as VRBO and TripAdvisor.
However, the settlement only involves Airbnb, Barnes said.
“Airbnb was the biggest elephant in the room because they weren’t paying any accommodation taxes or any business license fees,” Barnes told the Port Royal Town Council Feb. 12.
Who’s getting the money?
Besides Hilton Head and Port Royal, Beaufort County also has some money coming. The city of Beaufort and town of Bluffton, however, are not part of the lawsuit.
Statewide, Myrtle Beach, North Myrtle Beach, Charleston, Mount Pleasant, Charleston County, Columbia, Edisto Island, Folly Beach, Greenville and Surfside Beach are parties to the settlement as well.
How much each community will receive will depend on how many Airbnb rental properties they have, Barnes said, but “it’s definitely something that’s going to be good for all the jurisdictions.”
The amount of the final distribution to each community won’t be publicly released until every jurisdiction has approved the agreement, Barnes said. All of the communities have approved the settlement except North Charleston which is expected to act later this month, Barnes said.
How much are they getting?
However, some communities have already made the amounts public.
North Myrtle Beach passed a resolution to accept the settlement Feb. 3 in which it disclosed that its share was $2 million in unpaid business license fees and accommodations taxes.
The Post-Courier in Charleston reported Jan. 17 that Mount Pleasant’s share was $497,000.
At the Feb. 12 meeting in Port Royal, Mayor Kevin Phillips asked what Port Royals’ settlement amount was. He was told $146,873. The Town Council then voted to approve the settlement.
Heather Woolwine, Hilton Head’s communication’s director, said details of the agreement including the town’s share would not be released until all the parties had approved it, per the settlement agreement.
Required to collect taxes
The suit argues short-term rental platforms, like hotels, are required to collect taxes on rental accommodations and turn them over to local governments. For example, the Town of Hilton Head Island has a 1% local accommodations tax and a 2% beach preservation fee. These highly sought after funds raise 10s of thousands of dollars each year that local governments must distribute to community groups whose purpose is promoting tourism through festivals and other events.
The lawsuit said rental agencies failed to collect the taxes and remit them and also said the online vacation rentals did not get business licenses and pay the fees.
In some instances, the lawsuit says, the defendants represented to hosts and guests that they do collect and remit state and local taxes, which is misleading.
“These deceptive methods, acts and practices have resulted in and caused substantial actual damages and lost tax revenues to each and all of the Plaintiffs, which Plaintiffs seek to recover in this action,” the lawsuit says.
Short-term rental growth
The settlement comes as many South Carolina communities wrestle with regulating a growing number of short-term rentals, which some community members say are reducing the number of long-term rentals available for local residents.
In December, Port Royal approved a revised ordinance that capped the number at 6% of total residential units.
Hilton Head officials have previously said the sheer number of short-term rentals and conversion of units previously rented long-term has contributed to the island’s rising housing costs. An ordinance approved in 2022 was the first time the town stepped directly into regulating short-term rentals.
Phillips, the Port Royal mayor, wonders what the town will be able to do if it discovers Airbnb isn’t paying the correct tax amounts in the future. Barnes said an audit could be conducted.
“This is for past stuff they didn’t pay,” Barnes said of the settlement. “If they mess up going into the future, that’s another issue.”
What’s next
Barnes has been making appearances in the communities involved to explain the details of the settlement and ask for approval.
A forensic accountant scoured data provided by each community and came up with a total number that was owed by Airbnb, Barnes said. The $60 million settlement, Barnes said, was 92% of the number that the communities felt they were owed, he said, which is “pretty high.”
Also part of the settlement is the stipulation that Airbnb will pay accommodation taxes and business license fees going forward.
“From here on out, they will be collecting accommodation taxes and paying them in full to Port Royal and the other jurisdictions and they will be paying business licenses going forward as well,” Barnes said.
Per the agreement, the $60 million will be distributed within 30 days of the settlement approval by all of the communities, Barnes said.
