Douglas County leaders struggle to explain what their plans are for taxing Airbnbs, day cares and other home-based businesses

photo by: Adobe Stock

Airbnb listings are shown in this generic Adobe Stock photo.

After scrapping a plan to more than double the property taxes of owners of Airbnbs and other such short-term rental properties, Douglas County officials are struggling to explain what comes next.

What they are not saying is that Airbnb and Vrbo owners have permanently dodged the prospect of having their property classifications changed from residential to commercial, which would mean their tax assessment rates would more than double from 11.5% today to 25% in the future.

They also have declined to say whether they are considering a plan to increase the tax rates for home-based day cares, which also use residential property to host a commercial enterprise.

That possibility has arisen because the county has contended a state statute — KSA 17-1439, if you are keeping track at home — is in violation of the state’s constitution, although a court has not yet made such a finding.

Among other items, that statute lists that home-based day cares should be taxed as residential uses, meaning their taxes are figured at the 11.5% rate rather than the 25% commercial rate.

However, the county contends the state statute is unconstitutional because it allows for similar uses to be taxed differently. The county did not zero in on the day care issue, but rather focused on the short-term rental issue. The county’s argument is that when homes that are used as Airbnbs are taxed at residential rates, that is constitutionally unfair because hotels are taxed at commercial rates. The county has concluded that Airbnbs and hotels are similar enough uses that the constitution requires them to be assessed at the same taxation rate.

While the county didn’t bring the day care issue up on its own, it quickly emerged because day cares are specifically mentioned in the statute. Additionally, an issue of different tax rates for similar day care uses exists. Day cares that are based in a home generally are assessed at the 11.5% rates, while day cares that are located in a standalone commercial building are generally taxed at the 25% rate. That fact raised the natural question of whether day cares are next on the county’s list.

The Journal-World on Tuesday — a day after we reported on the plan to increase the tax rate for short-term rentals — began asking the Douglas County Appraiser’s office whether it also was contemplating a change in tax structures for home-based day cares. County Appraiser Brad Eldridge told the Journal-World via email that the county had not yet gathered data on home-based day cares and couldn’t make a determination until it did.

But when the Journal-World asked whether the county was planning to collect that data, and specifically what data the county was referring to, communication with the county stalled.

On Tuesday afternoon a county spokeswoman said the county needed more time to answer that question and others. On Wednesday, the spokeswoman said answers to the day care questions and other questions still were not available. On Friday, the county sent out a press release saying it had decided to put on “hold” its decision to increase the tax assessment rate for short-term rentals.

The county did not provide answers to the Journal-World’s questions submitted on Tuesday, only the press release. That press release, though, created questions about whether the county plans to restart its efforts to change tax structures, and to do so for multiple home-based industries. “Concerns of uniformity and appropriate classification for a variety of home-based businesses have been raised,” Eldridge said in the press release on Friday.

When the Journal-World asked the county spokeswoman on Friday which home-based businesses the appraiser was referring to, she said she didn’t know. Later on Friday, she said the county didn’t want to say anything beyond the press release.

What is clear is that the owners of Airbnbs and other such short-term rentals won’t face the tax change in 2024. The county’s decision on Friday to put the program on hold essentially means the tax structure could not be changed until 2025 at the earliest. The same goes for any other home-based businesses that the county may be contemplating for an increase in tax assessment rates.

Douglas County appears to be alone in taking action on this issue in Kansas. State Sen. Tom Holland — a Baldwin City Democrat who is the ranking minority member on the Kansas Senate Committee on Assessment and Taxation — said Douglas County’s efforts were the first he had heard of any county trying to tax Airbnbs and short-term rentals as commercial property.

He said the effort surely would raise multiple questions about whether other types of home-based businesses also would need to be taxed at commercial rates.

“I think it definitely opens up a lot of things to think about,” Holland said, speaking to the Journal-World just prior to the county’s announcement that it was putting its plan on hold.

Holland said local government officials likely will need to address another issue if they want to go down this path — the number of tax abatements and other such tax breaks they give to commercial enterprises. For example, he said while Airbnb rentals in people’s homes might be taxed at a lower rate than hotels or motels, “I would be curious to see how many of those hotels and motels are actually paying 25% versus having a tax abatement.”

Prior to the county putting the plan on hold, Holland said he wouldn’t be surprised if the county faced legal action over its decision.

An issue that likely would have emerged in any lawsuit is that it appeared the county was making a decision to allow bed-and-breakfast properties to be taxed at the 11.5% residential rate while taxing Airbnbs at the 25% rate.

When the Journal-World asked why that would be the case, given the similar uses of a bed-and-breakfast and an Airbnb, the county did not respond.

Other questions that the county did not respond to included:

• Would an existing short-term rental property qualify to become a bed-and-breakfast — and thus be assessed at the residential rate — if it went through the steps to provide food as part of its facility rental? The Journal-World asked if Airbnbs simply would be able to leave breakfast food in the cabinets or refrigerator, for instance, and thus be classified as bed-and-breakfast facilities.

• The Journal-World also asked why the county focused only on short-term rental properties rather than looking at the number of home-based businesses that may face the same tax structure issues as short-term rentals. The Journal-World asked whether there was any concern that short-term rental property owners would be singled out by this approach.

In its press release on Friday, the county said it had received feedback from short-term rental property owners that “revealed new information and nuances” that needed to be researched.

While short-term rental property owners who reached out to the Journal-World certainly were expressing concerns about the proposed change, there likely are some community members who were hoping the change would take place this year.

Hotel operators have brought up the discrepancy in tax rates previously, and some neighbors have expressed concern with the proliferation of short-term rentals in their neighborhoods. Some community members also have suggested that other communities in other states that have clamped down on the availability of short-term rentals have seen housing prices moderate. Addressing affordable housing issues has been a high-priority item for Douglas County; however, no county official has said that the change in tax structure was being done for affordable housing reasons.


Welcome to the new Our old commenting system has been replaced with Facebook Comments. There is no longer a separate username and password login step. If you are already signed into Facebook within your browser, you will be able to comment. If you do not have a Facebook account and do not wish to create one, you will not be able to comment on stories.