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I have been hosting for over 2 years on Airbnb and collecting the tax portion at check in. I have indicated in the house rules section and through a message to the guests - the tax is due at check in and the amount. I collect the money and provide a receipt with my tax number as required by law. Never has it been a problem with the guests and I have had hundreds this season alone.
I got this process from an article in the tax section on Airbnb and through this forum.
My problem - Yesterday I got an email from the resolution center telling me that I could not collect the taxes the way I do (so I called) and was told if I continued, I would be flagged and my account cancelled. They suggest that I open a resolution claim for each booking that guests can approve or decline the payment (collecting tax is not an option). I went back to the article on Airbnb and sent them a copy to prove I was doing what they told me to do. Today I got another email confirming what they sent the day before (open a resolution), went back to the article I copied yesterday and it was changed!
I know a lot of you collect the taxes the same way, has anyone else received this type of communication from Airbnb and if so what have you done?
So how do you handle knowing which transactions will need to have tax collected? Does it go by date reservation was made versus date of stay?
For example - let’s say right now I am at $29,000 for the year and I have several reservations that are a few months away (within the same year). So technically I do not have $30,000 worth of reservations. But then I start getting some more reservations that are for closer dates and now I am at the $30,000 mark.
So now…when the guests staying in a few months, my income is over the $30,000 mark, but at the time they booked I was only at $20,000 worth of sales, so I did not charge tax on their reservation.
Are the people staying in the future still exempt since the made the reservation far in advance? I hope I am making some kind of sense.
For a more clear example - let’s say the first booking for the year is made a year in advance. By the 11 month you are nearing $30,000. By the time the “first” reservation stays you will be over $30,000. Which guests will be charged the tax?
It’s a difficult process to track. Most of the properties I have have charged from inception so not a concern. I had one that booked up quickly and I was able to track it based on arrival date, when the tax is due to to be collected. Not that hard to do.
I believe you may have your tax information confused. There are 2 sides to the tax issue. As far as I know, Airbnb does not report any income to the federal government until you hit $20,000. You would still need to report that income, regardless of the amount, on your federal tax return, they just don’t send in a 1099 to the government. The other thing is that you should be paying is your local city & state taxes. Those are collected on a quarterly basis (mosts of the time). In Arizona, we do not record our payments until the guest checks in, even though we collect money in advance. I have some reservations a year in advance in which they pay 1/2 up front & the other 1/2 60 days prior to check in. I do not record the income until their actual check in date. This is simply how the tax code is set up. I should think it would be the same everywhere.
I am licensed with the state & city for short-term rental opportunities. AZ recently passed a law making it legal to operate short term rentals. I collect tax prior to or at check-in regardless of how much money I have made with my rental. The amount I make has nothing to do with whether I pay local taxes on my rental. I do pay & charge a different rate for under 30 day rentals (the fall under transient lodging tax) verses over 30 day rentals. This is stated in my listing description & again in the note section & is very visible to anyone inquiring. Those renting for 30 or more days pay 1.8% tax. Those staying less than 30 days pay 14.7%. At this time, Airbnb does not collect nor distribute taxes collected in our state, but that may soon change. I mentioned to them about the differences in tax rates so they are aware. I do list on VRBO as well & they allow the property owner to insert their own tax amounts in their listing fee’s. When I have a 30+ day rental, I simply amend the quote with the correct tax percentage & it is collected by VRBO on my behalf, then remitted with their payment to me. I like that option as I have control over paying quarterly to the proper governments.
For my instant booking, the tax is collected before or at arrival in the form of cash. I choose not to accept checks at this time.
Hope this gives you a bit of insight as to taxes.
You may want to bite the bullet & set up an appointment with an accountant to verify what & how you should be doing it in Canada. I would rather be on the safe side of owing taxes than the other way around.
Thanks for your input. I am not asking them to collect and remit the tax, mainly because we send a net payment but also for a whole host of other reasons. I do have an accountant am not confused about reporting it.
I am simply trying to collect tax through the booking platform (just like a pet or cleaning fee). Instead of collecting it separately from the booking at check in, I’d like the tax to be included in the payment and to provide our tax number in the guest confirmation. A simple request, I think.
VRBO allows a field to collect the 13% tax and tax number and sends it to me in the payment. None of the providers can submit for us as we send a net payment which is less any taxes we paid for supplies or any other expenses on the property.
Due to the lack of a tax field on AIrbnb, I tell the guests it is due at check in and they pay it when they arrive. Not that big a deal, never has a guest said anything about it. Again I’d prefer to collect it with all together.
AIRBNB says I cannot do it the way I do, I need to create an item in the resolution center for the tax (for each booking). The problem to begin with.
Dibot - thank you for the detailed explanation. But I understand my taxes here in the U.S. I was throwing out a hypothetical situation to the OP, because I was curious how it worked in his/her area - where only if you earn $30,000 then tax is collected.
I collect all lodging tax and remit monthly. I need to have mine in the mail by tomorrow.
I state clearly in my listing that the price includes state and county tax. So at my quarterly tax time, I will only pay the actual taxes from that amount and keep the part that the tax would have been on. It’s only a matter of calculation. I’m not being taxed on the tax I assess. I’m being taxed on the amount that we keep as our own. The guest pays the tax which I assess at the time of booking through Airbnb.