How to collect and pay occupancy tax

Regulations/Tax Issues
1

Hi:

I live in a city where Airbnb doesn’t collect the Occupany Tax./Tourist Tax. I 've only been doing his a few weeks, but have not collected tax from 6 guests so far. The info supplied by Airbnb either doesn’t answer my questions or is incomplete.

Is anyone in a similar situation or do you have any info about how to go about this? I am totally uninformed and don’t want this to become a problem.

Thanks -

Marie

2

I forgot that I don’t have to “sign” my name

3

If you are in the States, you will need to contact your local city/county tax agency (whoever it is that charges the Occupancy/Tourism tax. They will have you fill out the appropriate paperwork and tell you when payments are due, etc.

4

Collecting is the easy part and you can handle it one of two ways:

  1. The way most accountants will tell you to handle it is to assess the tax and ask guests to pay it through resolution center or in cash on arrival. This is how I did it before Air started collecting taxes in my state. Be sure you include it in your house rules/listing. “Airbnb doesn’t collect occupancy taxes, so they must be paid separately through resolution center (in advance of arrival) or in cash at check-in”. I also included the amount owed in my confirmation e-mail. I’d highly suggest collecting before/at arrival because it’s a PITA to chase people down after they’ve left. I preferred cash so it didn’t show up in my Airbnb earnings and wasn’t subject to host fees. I kept a “square” dongle so I could collect it w/ a credit card at arrival if they forgot cash (although you lose a bit to CC fee).

  2. The other option is to take it out of your host payment. Some hosts prefer this because it’s less hassle for both them and the guest, but the tax is essentially coming out of your pocket and it’s not as “clean” in the accounting.

The second part is remitting to whatever government entity. That’s trickier to answer without knowing your location. In my state you register online and submit quarterly revenue totals and remit the tax payment. The Small Business Development Center (SBDC) is a good resource, often offering workshops and counseling for this type of question. You might also consider an accountant - mine helped me navigate the state’s website (I’m fairly tech savvy, but it was labyrinthine!). An accountant can also be invaluable in deciding how to structure your business and what expenses to track for deduction purposes.

Good luck!

5

I am completely confused by this issue!
New York City and New York State collect four taxes on hotel rooms (sales and room taxes) but exempt “efficiency” apartments and “bungalows”. If the lease is over 30 days, you don’t charge room taxes, only sales tax, but unless you get a C of O as a hotel, there isn’t anyway to register with and pay to the state. I’ve asked real estate lawyers and hosting managers but no one seems to know what is truly legal. Does anyone have any insight?

6

Just a little discouraged by this issue…

For the last two years, I have used the Option 2 that Allison_H describes. And she’s right - it’s basically coming out of my pocket because potential guests make comparisons of the “room rate” and make their decisions based on that. When the final tally includes separate amount for Lodging Tax, guests accept it because that’s the way it is - they’re going to pay that no matter where they stay. So if I try to “add it on to my room rate”, I’m potentially overpricing relative to the competition and losing bookings. 13% Lodging Tax in my case and it’s no small deal (and don’t forget the Airbnb %age I have to pay on the markup!)

So the frustrating part is Section 13.4 of the new Terms of Service (to be effective 3/27/2019) that discusses what Airbnb calls “Pass-Through Tax Feature”. That would be a new feature for Airbnb where they would add on a Lodging Tax amount that we, the hosts, would specify. It would show up as a separate charge on the guest’s tally (“Lodging Tax” or “Occupancy Tax”) and Airbnb would then pass that mount on to me so I could remit to the local government. Sounds great, right?

So I wrote to Airbnb “Customer Service” (putting that in quotes on purpose) asking how and when I could sign up. They responded with “At this time, the Pass-thru feature is not available to hosts in your area. Though we are unable to interpret the Terms of Service, I can note that there may be a feature where Airbnb will collect local taxes and pay them out to hosts directly rather than to tax authorities.”

"Though we are unable to interpret the Terms of Service"??? Airbnb can’t interpret its own Terms of Service??? They describe a feature in their own Terms of Service and then say they don’t know if or when the feature will be available because they don’t know how to interpret their own Terms of Service!!!

So I’m discouraged. About a feature that VRBO has provided for a long time. And Airbnb can’t seem to get a handle on.

2 Likes
7

I feel like they are holding tax collection hostage as a bargaining chip with the legislatures - as in - ‘look how much we could collect in taxes for you if you would just make us legal’ (This is in NYC where many (most) of their listings are not legal)

8

We have a condo in a ski town that charges a 14% tot (transient occupancy tax). We have to submit payment to the town monthly. With airbnb we incorporate the tax into the nightly rate and into the cleaning charge. With vrbo they separate the tax into a separate column. I feel that works a bit better for the consumer since they can see what the charge is for (airbnb looks like a higher nightly, cleaning rate)

1 Like
9

I also “incorporate the tax” or at least that’s what I tell myself. My nightly rate might “include the tax” but it competes with other rentals where the tax is not incorporated. At some of the other rentals, the tax is 1) added separately or 2) neither charged to the guest nor remitted to the government. Either way, my advertised price appears higher than the competition because the potential guest is not likely to pay much attention to whether the tax is included when he/she is deciding which one to go for.

10

@allenthompson, I went on Airbnb in our area to see if and what others are charging for TOT (transient occupancy tax). Some line-item the tax, as with cleaning and Airbnb service fees, others do not charge it but to be sure, the county tax collector will be coming for their ‘fair share’… I am a new Airbnb host and have already received a carefully worded letter from our local tax collector for their cut of my pie. I will pay income taxes on the earnings, and property taxes but I will also pay 10.5% TOT. My strategy is to now line-item the tax for the guest to see. My Airbnb price will not go up but the total the guest pays will necessarily increase. If the TOT is wrapped into the nightly price of the Airbnb, I believe Airbnb will take a greater service fee. Is that right?

1 Like
11

Yes. You are correct, as well as there will be increased other taxes and fees charged by AirBnB that will make it look like you are earning that much more as well. I would think it very prudent all the way around to include the line item.

2 Likes
12

I just spoke with Airbnb. They do not offer the option of creating a line-item for TOT unless you operate in one of their listed cities (which I don’t) or have 6 or more listings. To me, this would be a pretty simple software fix and could easily be incorporated into their platform. Their stated expectation is that the host will manually collect TOT from guests. The host will then issue a receipt to their guest and file their Transient Occupancy Taxes with the local tax collector.

13

Then I would indicate this in the House Rules and that it will be collected SEPARATELY from the AirBnB reservation and taxes and fees.