New to Airbnb. Own a vacation home and list whole house for rent on other sites. Listed on Air yesterday. Trying to get all my ducks in a row STS.
The vacation rental permit issued by my city requires I collect, file and pay 10% TOT on total rental fee (including cleaning) for any consecutive day stay of 29 days or less.
Air has no line item for collecting taxes (unlike other listing sites as others have pointed out in numerous posts elsewhere on this board). Instead, Air suggests I either collect it in person upon guestsâ arrival (really?) or collect it via a Special Offer, for which I will receive payment in the usual wayâseveral days after guest check-in along with the rest of the rental fee. As I read it, a âSpecial Offerâ would then allow Air to collect commission on the TOT and would also report the TOT as income. Am I reading this correctly?
Yup⌠and thatâs why the whole tax thing with Air is SO LAME!!!
So a Special Offer is not the answer⌠Why? Well, if you notice, it will pyramid the total. You get taxed on the new, higher total, which is inclusive of guest tax. Plus, unfairly, the guest pays even higher tax than they would have if they were charged tax on the mere payout amount. (The amount YOU are paid by Air and have to report.)
So Yeah, may I say it again? Lame!
Iâm in Hawaii where we have to collect and excise AND a TAT, for a grand total of 13.42%. I simply state that tax iwill be due upon arrival in cash all over my listing description, and all over my correspondence with them. âThe tax due will be on my payout amount will be $xxxx which is due upon arrival. The collection of tax is mandatory and non-negotiable.â I send them the amount so they have it ready to bring. Then I leave an envelope on their door with the amount, their name and the date. I have my tax certificate displayed on the wall. I get it from them in cash when I greet them, put it in a little box and pay it twice a year to the state.
There is no other way to do it that makes sense or is as easy. No way that it is mathematically possible to build tax into the cost of the nightly room rate either without having to eat some of the tax yourself. Tax is collected on tourists in Hawaii, not paid out by the merchants for them! Think of it that way if you are tempted to build it into your nightly rate. Youâll never come out ahead, no way, no how. A fourth grader could tell you that!
As long as you clearly disclose every way from Sunday that there will be tax due, and the guest acknowledges this before booking your place, and is reminded of it before they arrive and when they arrive, itâs probably the easiest and best. Only had one guest complain and he complained about everything else and was from FlipKey.
P.S. some states are already collecting the TAT on your behalf⌠but not any other taxes. Itâs only a few states, not sure which ones.
Welcome cj132!
Yes, as Kona said - itâs really shameful that air doesnât help us out in this way - other booking sites do. However, what air does that others donât is to allow us to pre-screen our guests before accepting the booking.
I now have wrapped the taxes into my price - that is, consider it an expense when deciding what to charge to make an adequate profit. However, as Kona said, then you pay tax on the tax!!!
Not being aware of this initially, I contacted those that had made reservations already and asked them to pay the tax in cash upon arrival. This worked fine - no one objected (my price was very low anyway, and it was only a small additional amount - not enough for them to suspect me of trying to gain) but it was a bit of a hassle.
Unfortunately that is your choice at this time - roll it into the price and pay tax on your tax, or, request it in cash upon arrival. If there was a consistency across âairâ it would be easier to have the taxes paid in cash - AT THE VERY LEAST!!! air should calcuate the amount for us and inform the guest that they will have to pay it - I donât need air to do the collecting, just at least be the one to inform the guest of the issue. If your competition down the street doesnât run their property legally and doesnât tax, it makes you look bad.
Personally I have even included a photo in my listing of tax forms, insurance policy & license and state that âWe work to protect the airbnb community by paying taxes and being adequately insuredâ. Iâm sure my guests flock to me because of it, lol! But at least Iâm putting it into peoples minds and making the community aware that this is an issue.
On top of it all, SOME areas, even smaller ones than mine (suburban dc) DO have a tax line on their bookings with air - someone tell me why, with all the money they are making, they canât do it for us all?
Again, they donât even have to know my tax rate - they can ask me - Iâll enter it, just like I enter my price.
Phew!
Thank you Kona & DC for your detailed replies. (Donât get me started on why I think theyâre not putting in a line item for taxes.)
DCâMy property rents for 2800 a week during peak season. Come tax time, and Air sends me the 1099 reporting my rental income, it would really stick in my craw to pay income taxes on the TOT.
I do state it in my rules. As well, I have a Rental Agreement, which I require guests to sign before confirming booking. I will have to change it a bit for Air bookings.
Kona, I see your posting a lot on this board and that youâve had many guests. Iâm glad to hear youâve never had anyone not leave the cash in the envelope. Iâm not always available to meet & greet guests; sometimes I never meet them in person at all, so collecting it in person may be a challenge.
When you state âpayout amountâ is this your rental amount less Airâs 3% commission on your portion? And is that the amount you use to calculate tax due? Iâm thinking that 3% is a service charge, and is treated as a business expense, not income.
Hi again CJâŚ
I am in Hawaii have to report my GROSS profits on my excise return. (that means every single cent I collect.) Keep in mind Hawaii is the ONLY state in the union to have an excise tax system in place, which is a carryover from the plantation days⌠It is a tax levied on the seller and it is for goods and services. The seller may collect a small amount to make up for the fact that you are paying tax on top of tax. Other states are definitely different, so what I am stating applies to Hawaiiâs excise tax situation only.
I report and collect tax in cash on my payout amount. Iâve never had a problem with anyone refusing, and if they did, I would attempt to collect it from their deposit. But everyone understands about tax and usually always has it ready⌠Never had any problems!
I have never quite understood why people find the separate tax line item fields on places such as VRBO or FlipKey useful⌠All it does is add that tax to the total, which then pyramids on you just like if you did a Special Offer on Air. To make all of it come out correctly (again, I can only speak for Hawaii) I charge the tax on my payout amount (the guest reservation minus the three percent.) Itâs better for the guest too as they are paying slightly less tax.
By the way, curious as to what your theory is about why Air wonât address this? 
In other news, the state of Hawaii finally was just able to collect millions in tax owed by online companies like Expedia.
Hawaii Wins $53.1 Million Settlement Against Online Travel Companies
Posted on September 30, 2015
The State of Hawaii has recovered $53.1 million in general excise taxes, penalties and interest from online travel companies (the âcompaniesâ) including Travelocity.Com, LLP, Expedia, Inc., Orbitz, LLC, and Priceline.Com, LLP from tax litigation that began in 2011.
Attorney General Doug Chin said âOnline travel companies derive substantial profits from the sale of hotel rooms, rental cars a nd other services in Hawaii. The importance of the Hawaii Supreme Court ruling is the precedent it establishes. People or companies who provide goods and services through the Internet that are used or consumed in Hawaii are subject to Hawaii taxation, despite being domiciled in other states.â
The Tax Appeal Court previously ruled that the companies owed general excise taxes but not the Stateâs transient accommodations tax that is assessed on operators of transient accommodations, like hotels. The State and the companies appealed to the Hawaii Supreme Court from these rulings.
On March 17, 2015, the Hawaii Supreme Court upheld the Tax Appeal Courtâs ruling that the companies are subject to Hawaiiâs general excise tax, but concluded that they are taxable only on their net receipts from the sale of hotel rooms in Hawaii, not their gross receipts. The Court ruled that the companies receive the benefit of an income splitting provision that applies to travel agents in chapter 237, Hawaii Revised Statutes.
The Court rejected the companiesâ argument that they were not doing business in Hawaii. The Court stated in its opinion, âthe [companies] are not passive sellers of services to Hawaiâi consumers. The [companies] actively solicit customers for Hawaiâi hotel rooms and actively solicit hotels to contractually provide the right to sell on their website the right of occupancy of hotel rooms.â
The Court remanded the case to the Tax Appeal Courtto re-determine the amount of general excise taxes, penalties and interest the companies owe to the State of Hawaii. On September 22, 2015, the Tax Appeal Court entered final stipulated judgments setting forth the amounts owed by the companies and the amounts that the State needed to refund from the Stateâs litigated claims fund.
Litigation against the companies for their other State tax obligations for their other business activities in Hawaii during the period 2000 through 2013 is continuing.
The way to collect taxes without paying fees or having it add to your total receipts is to do the following.
- go to the Resolution Center (https://www.airbnb.com/resolutions),
- click on âRequest Moneyâ,
- Choose the guest youâre requesting taxes from and choose âNextâ
- Choose âOther Trip-Related Issuesâ and choose âNextâ
- Fill in the amount you want to collect and choose âNextâ
- Skip âUpload Photosâ
- Add a note for your guest. Hereâs what I paste into the note box:
"Hi XXXXXXXX. I calculated 9% Madison Occupancy Tax, 5% WI State Sales Tax and .5% Dane County tax on your $XXXXXX room rate (I deducted the 3% from your room rate that Airbnb charges me). Total (14.5%) is $XXXXXX for the tax Iâm required to collect which will be charged to your account when you approve. Airbnb requires me to round the total up or down to the nearest dollar. Thanks. " - Click âNextâ or âRequestâ and the resolution request will be sent to your guest.
- All they need to do is approve the request and it will be charged to their credit card and show up in your account with no fees, extras or anything else added. It will not be added as a part of your room fee either.
Iâve been doing this for over 6 months and it works perfectly. I usually charge the guest a few days before their reservation and it works great although itâs a lot of extra steps and a pain in the butt. Itâs something Airbnb should be doing for ALL their hosts, not just the ones in selected larger market areas. Of course Airbnb doesnât tell you to do it this way because they want to make money by charging their fees on money you collect from guests and pay in taxes. Seems really disreputable at the very least and could possibly even be against the law.
Iâve also built a spreadsheet that calculates and totals the amounts due to city, state, and county and tracks whether the guest has approved payment. It works really well and lives on GoogleDocs so I can access it from anywhere on my phone or laptop. If anyoneâs interested Iâd be willing to sell its use for a nominal amount. A lot of hours went into putting it together. If anyoneâs interested my email is sich@sich.us.
Do it through Paypal. Just send them a request for payment and thatâs it. They must have a Paypal account, but thatâs very simple to set up for them.
Itâs going to show as income in your end of the year statement. They just add to it the total of everything you were paid that year. So the only thing you may be avoiding is the 3% commission.
Itâs simply added into your gross earnings total.
So does getting reimbursed for damages. You have to remember to deduct those charges!
Why not get it in cash? Then thereâs no pyramiding of anything. Itâs easy and 99% donât complain.
A couple of the sites DO offer it as a line item thatâs not taxable and commissionable, but most donât.
I was concerned about collecting tax in cash in the beginning but so far I never had any problems. All I do is send them a reminder with the total due on arrival 5 days before check in. I ask them to have exact change. So far all guests had the cash ready without any problems.
I canât see a way of paying the tax through AirBnb as this would look as if the tax is part of your income. I consulted an accountant about this, the tax is something you are collecting on behalf of the government which is not part of your turnover.
You can just export your transaction history to Excel, sort by Type and then sort out all the Resolution Payouts. Airbnb doesnât send year end statements any more for their âsmallerâ hosts. I personally donât like dealing with cash or asking my guests to dig into their wallets to pay an extra fee. Guess thatâs a personal choice for hosts. Doing it the way I do it is all recorded on my spreadsheet as it happens so at the end of the year I have all my totals and deductions right there and ready to report.
I donât understand. You are still asking them to dig in their wallet when you send a money request. Cash is much easier to ask for. I make sure they know they owe this before they ever book. When I send them the acceptance and when I send my info document.
Air never sent out statements. They only thing they used to do was send 1099 forms, but now only if you have 20k in income and 250 guests.