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Depends on where you are. In Florida, Air collects and pays our taxes directly. In other places you take the taxes out of your profit, not by charging extra. You need to speak to your local tax people…
I already know what the taxes are. Again the problem is, AirBnB unlike every single site doesn’t have a line item. So you have to bake it in to the price- which is a pain for accounting and then puts your price way too high compared to those who aren’t bothering to pay the taxes
I bake it into the nightly rate and disclose that to guests. (Disclosure of taxes is a legal requirement in my US state.) I try to put a positive spin on it by stating I have a business license and permit and that my price is all-inclusive of sales and lodging tax. I like to think that helps me get business customers, which are 50% of my business. But who knows. There will always be people who operate under the table and I can’t do anything about that so I don’t worry about it.
This is not a new thing or an oversight on Airbnb’s end. They consciously made the decision to not include it and lord knows why. Only where local litigation forced their hand has Air included the local tax for remittance. Here is Airbnb’s documentation on it:
Legally you are not suppose to “bake it in to your charge”. At least that’s what our state revenue office told me. You charge the tax on the exact amount you advertized. Here’s what I do: The first line of my listing states I will be collecting the tax when customer arrives. I take a small white envelope and write the tax charge on the evelope and place it on the dresser. I always include, “thank you!”. It has never been a problem albeit some have asked about it. I have now set up a credit card pay system so that I can email an invoice to them and they can pay it online as well. It is truly a pain to have to bother with this! Most don’t do it but they are operating illegally and I chose to operate legally. Not to mention don’t want the revenue people fining me and stalking me.
I issue a paper invoice (like the hotel slips under your door), showing the (derived) base rate, and the amount of each specific tax to add up to the total. I also have the tax percentages in detail in my listing. If the state wants to come after me for doing it that way, so be it.
Ugh, Teak, do you eat the credit card charges for the cc tax payments you get?
We have a vacation rental in Hawaii. We send our guests this message:
Next, we will be sending you an invoice for the required Hawaii State Taxes that AirBnB is currently unable to charge directly at the time of reservation. The additional tax is 14.416% of the booking cost (nightly rate + cleaning cost). You will receive a separate detailed invoice from us through the AirBnB Resolution Center.
Then we create an invoice and send it to our guests through the Resolution Center.
First off, I don’t see why the state would come after you for doing this. Sounds O.K. to me. But you do need to charge a tax on the amount you are advertizing. And, as as other’s have stated, you don’t want to pay tax on your tax. As for the 3% credit card charge, yes, I eat it but it happens so rarely and it’s so small an amount. However, I could tell them there would be a small charge for using the credit card and add that to the invoice.
My reported gross income is my Air gross income divided by 1.1325, to net out the tax. Fortunately (or unfortunately ha!) I do not make enough to get a 1099 from Air, and therefore do not need to make an adjustment on my tax filing and explain it to the IRS. I do get an Air fee on the tax, but it’s pretty minimal.
So sounds like either bake it in- or do an add on - as I thought. It’s such a nightmare for co-hosts. Hosts have to pay 11% I can’t raise price 11% then take out my 11% especially since “Payout” includes % taken out by AirBnB- it’s a mess
In Hawaii, we have to file excise along with our TAT and this must be classified on your excise return. So for example, if I sell coconuts to tourists, I have to report every penny I make including the tax. If I sell coconuts AND rent on Air, I have report them both in different sections and file an additional return for the TAT. These amounts MUST balance with your state income tax returns so there can be no fudging. The only thing that is exempt is out of state sales. Say if I sold my coconuts to you in VA.
Only the people with no excise license already can get away with not paying TAT.
I’m no math whiz but even I can see if you bake it in, it starts to pyramid. So if my rate is 100 per night and I charge the guest 115 to cover the tax, then not only I am getting reported for the 115, I’m also responsible for paying tax on the 115 instead of 100. Oh and I am charged their commission on the tax too. I just get it in cash.
I think sometimes people just think it is the cost of doing business but how many of them realize every little thing starts cutting into your profits. Reminds me of the old I Love Lucy show where Lucy and Ethel bottle their own salad dressing and forget about all the production costs, and in the end end up delivering all the salad dressing orders door to door. And Ricky calculates they lost money on every bottle instead of making a windfall.
In your example, I only report the $100 as gross income. So my guests would get a breakdown receipt, $100 room rate, $6 state tax, $7.25 county lodging tax, totalling the all-inclusive rate of $113.25 per night. I’m confident I could explain it to any auditor by pointing out that the reservation platform (Air) does not accommodate explicit listing of the tax. The only thing I’m stuck with is Air “overcharging” the host and guest fees. Even if Air were to collect the lodging tax through some regulatory agreement, I’d still have to remit state tax. I’ve seen other retailers advertising “includes tax” for all-in prices.