Business personal property taxes on Airbnb hosts

[GeminiMom]

Hi,

I live in Virginia where we pay personal property taxes on our cars annually. Apparently businesses in the county I live in also have to pay tax on any personal property items that are used in your business. Since I registered with my town to legally rent our home out, the country now considers me a business owner. They sent me a business registration form a few days, and apparently they want me to list every item used in my “business” and what it’s assessed value is, then I am supposed to pay tax on the total of all that. I called them yesterday to confirm all this. She said I should list the beds, furniture, appliances, linens, TV, computer (that my guests don’t use but that I use to create my airbnb listing), etc, etc. This sounds absurd to me. Especially considering that we only rent our house out for about 10 days out of the year.

Does anybody else have to do this, ie. pay a personal property tax on all items in your house, in addition to the lodging tax you pay to your local government? I have no problem paying the lodging tax to my town. But this personal property tax for airbnb hosts seems crazy to me.

[konacoconutz]

That is totally insane, and surely a way to discourage anyone from hosting.

[Helsi]

This doesn’t sound right, why don’t you speak to a local accountant.

[Terryathome]

Our county Personal Property Tax applies to everything the guest has access to - when I questioned what needed to be included I was told EVERYTHING. “Even pens and pencils?” EVERYTHING. I mentioned thin is another thread - we host in our home and do not allow access to our family room or living room because we didn’t want to have to include everything in those rooms.

They provide an excel spread sheet and we have to declare: The item, where we bought it, when we bought it, and the purchase price. They assign the assessed value and determine the tax. Fortunately for us, the total came in below their lowest valuation to be taxed. Since it is in our home much of our furniture, dishes, etc have been ours for years and has depreciated. (Most items purchased int he 1980s!)

The assessor sends out the previous years form for updating each year so we are careful to keep good records of items purchased during the year (like replacing our refrigerator - we allow use of the kitchen so all appliances count.)

[konacoconutz]

I would be moving to another state, as that is pretty gratuitous taxation.

[Terryathome]

We don’t have a state tax so that helps. Our property and school taxes are also much lower than the state we move from. We do, however, pay the lodging tax as well as the PPT for our business.

[GeminiMom]

Thanks for the responses. I’m glad I’m not the only one who thinks this tax is a bit ridiculous. Terrythome, what a pain in the rear. I guess I’ll start a spreadsheet tomorrow and see how long and ridiculous it gets, then decide if we want to continue this nonsense. We already pay state taxes, sales tax, personal property tax on our cars, real estate taxes to the town and the county, and lodging tax from our Airbnb income to the town. Since we only rent our home an average of 10 days a year, I think whatever business property tax we need to pay should be pro-rated, i.e. less than businesses that operate year round or for months at a time.

[KenH]

Talk to a tax professional! We’re nice folks, but I don’t know that anyone here is a tax professional specializing in taxes of Virginia.

[K9KarmaCasa]

@dpfromva do you know anything about this topic?

[dpfromva]

Usual disclaimer, this is not professional tax advice.
GeminiMom’s county is quite organized to ID the new business license and send the form! This varies by jurisdiction (county or city). I am surprised to hear about “pencils and pens” because local business tangible property taxes are normally (but there are exceptions) for furnishings, equipment and tools, not supply items. I googled a bit and Florida jurisdictions seem to include everything – including leasehold improvements and supplies, I imagine because there is so much renting going on in that state. I would read whatever instructions come with the form and take the plainest English interpretation of them.
So they’re trying to capture stuff you buy specifically for the business at start up or at a later date, like replacement beds for your hotel. The system was not designed with Airbnb STR in mind, particularly for shared space. So do something reasonably defensible. For example, if you furnish the space with your old furniture, it could be valued at Goodwill or Craigslist used furniture value as its cost, as of the start date of your Air business.
For split use, I would think you could come up with a reasonable pro-rata business use – your computer is used by you 100 hours a month, you average 5 bookings per month with 0.5 hours per booking on the computer, that’s 2.5% business use – consistent with depreciation expense limits for your federal taxes. Think of it as part-time “renting” your personal computer for your business.
Although I would always advise compliance to the best of your understanding, businesses have been known to make a risk calculation as to the cost of complying to the nth degree vs probability and impact of potential penalties.

[GeminiMom]

Thanks for the reply. I’ve been in contact with the county commissioner office and it turns out the tax won’t be too bad. I made a spreadsheet and listed every item I could think of that our guests would use (TVs, beds, furniture, lamps, kitchen appliances, trash cans, etc, etc). I did not count pencils, LOL. The tax form included a percentage rate for the assessed value to account for depreciation (ex. items bought in 2017 = .8, 2016 = .7, etc). Even when I included all bedding like sheets, quilts, mattress protectors, towels, etc our total tax responsibility was going to be less than $150 (my county’s business personal property tax rate is $2.55 per $100). Then I talked to somebody from their office yesterday and he said my spreadsheet looked good, but that I didn’t need to count the linens because hotels replace those so frequently that they consider them “supplies” and not assets. Well alrighty then! I’ll gladly take them off. I bet our business personal property tax bill will only be around $125 or so. I can live with that