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Occupancy Tax Conundrum


#1

Hi Everyone

I asked this before but it may have been lost in the shuffle -

Backstory - Stayed in an airbnb in Mobile AL, then in Richmond. Loved it. On a whim I listed a spare room, and used bits and pieces from around my house to furnish it. I listed it with no forethought and was shocked to have an immediate listing and then to get booked for the summer (my initial price was insanely low).

Now I’m getting informed and legit, and I realize that I will be paying 7% occupancy tax on all my beautiful (but very low paying) listings.

What would you do? Would you write to the guest and ask them to pay it in cash when they arrive? It’s still small amounts - I’ll be out $175 for the rest of my bookings already made - I know that’s not a lot, and I understand I may have to eat it, but I set my price so low I’m not making a lot of money anyway. For a 3 night stay for 4 adults in 2 rooms my price is $69 a night, so their tax for the three nights would only be $10.

Any thoughts? I guess I know that it just has to be my loss…

Nancy


#3

How many guests are you talking about that have booked? If the total amount is a $175 loss then you could make that up really quickly. What is your competition charging? Immediately increase your rates to $99 a night, if it’s still reasonable. See if you can increase the cleaning fee by $10.

You could always email them and tell them that you assumed Airbnb collects your state hotel tax from the guest. You just learned that they are only doing this in certain cities/states throughout the country. And every other listing site informs the guest of the tax rate, so you were not aware that Airbnb is the only one who doesn’t collect the tax during the transaction. Let them know that you understand if they don’t want to pay, then you will eat the cost. You will provide them a hand written receipt in cash. Just word it so that it doesn’t cause ill feelings - like you are making them fell guilty. And just give them the choice. Or just eat the cost if you are not comfortable with this.


#5

Hi Beach-

yes, your math is correct - I was either rounding or it was a typo.

yes, I never even thought of it as a second room, its just a futon in a playroom with a Curtain. But they do end up with a private room, just no door. Truth is my kids are older and we only use that room 1-2x a week so its no big deal.

The guests that are arriving tomorrow have agrees to pay the tax.


#6

Hi! I am in NC and have been assured that airbnb is collecting the occupancy tax on my behalf & submitting it. They just started this practice in June, if I am not mistaken. Have you asked an airbnb rep about this?


#7

Hi Mermaid!

For my area, no, airbnb does not facilitate that. They do in DC, just down the road, but not for me, in a suburb.

DC


#8

Around here, them’s been fighting words as there are differing theories among hosts on this topic. :frowning: Different strokes for different strokes, but here’'s mine (and it is suggested by Air themselves, BTW.)

I collect that tax in CASH. I state that TAT will be due upon arrival upteen times… when I accept the booking, when I send the guest info doc, and in my directions. I provide the amount due (on the payout) as that is what I am reported on. Here in Hawaii we have excise of 4.167% AND TAT of 9.25%. Totaling 13.42. It’s two different taxes but the guests don’t need to know that. I just give them the total to bring and tell them to have it ready upon arrival. I tell them the TAT is mandatory and non-negotiable. I leave an envelope in the room with their name, date and tax amount due. If I greet them in person (most of the time I do) I hand them this envelope. I then keep the envelopes in a box until it is time to pay my taxes (semi-annually).


#9

Ugh, this crap makes my head spin. :frowning: That’s why it is so much easier to get it in CASH. So much easier.


#11

It may be numbers on a spreadsheet but it’s more complicated than it needs to be no matter how you do it.

I still take issue with the idea that AirBnB, a high-tech company now valued in the millions, perhaps more, cannot help hosts with a simple solution for this issue. Where are all their high-powered nerds who should have thought of this a long time ago? I think they are only collecting tax for hosts in response to cities who threaten to shut them down. The rest of us are on our own.

Currently, both tax collecting options (calculating a bunch of math on each booking that comes in, or adding it in and/or adjusting/making special offer OR collecting in person in cash) suck and Air should be doing better. Collecting the tax for hosts “could” be a good start… but then some hosts have complained that they only collect the TAT, not the excise or sales, leaving that up to us, meaning that even if they collect TAT on the reservation and send directly to the state, we STILL have to collect the excise or sales the old fashioned way. So our guests are getting hit with two tax bills.


#13

On this we agree…


#14

Yes, yes, and yes!! air has the technology to remove websites from messaging but can’t put in a line for taxes?


#15

Just fyi, I contacted all my guests personally and let them know they’d have to pay the taxes in cash when the check-in, ‘just like any other hotel’ and all have complied happily. I’m sure it helps that my listing was about $20 below market initially and some folks are getting a hec of a deal, even when they do pay the taxes!!


#16

Two things to think about on this topic, 1, various Hosts in the same city will have different tax rates, so AirBnB can’t simply write a few hundred dollars worth of code and collect the tax. In Canada, we have a Valued Added Tax called HST, , it kicks in when the host brings in MORE than 30,000.00 in a calendar year. If your under that threshold, you don’t collect or pay it. Over 30 thou, you need to collect it and pay it and the payments schedule varies depending on your volume. You may have to pay annually, quarterly or monthly. AirBnB only wants to be recognized a s a service we pay for, nit have any responsibilty for tax collection, because it puts them in difficult legal positions.
The second thing, is in several posts above folks are planning to collect occupancy tax on the net amount (after the 3% fee), but all tax rates are on the GROSS amounts. The 3% fee comes off at the income tax level as a business expense.


#17

Thanks for chiming in, DR - I appreciate it.

My thoughts are that ‘air’ should require us to tell them what our tax rate is, and they can calculate it and inform the guest that it is payable upon check-in. Or they can add it to the bottom line and to the remittance to us. Then it is on the host to be honest and pay it - but isn’t it always? Does that make sense? I understand in the case of VAT tax it won’t solve all the issues, but they could get a little closer. Also it would help clueless newbies like me have to figure out a bit about what they are doing BEFORE listing a room. I listed my room on a whim and was shocked to have my summer booked up very quickly. (Also didn’t charge enough, another rookie error…)

Thanks also for the input about paying on the gross. Groannnnnnn I don’t wanna -


#18

Clueless newbies should be rigorously examined on their knowledge BEFORE they open their doors, or be severely whipped! AirBnb now charhes us 3% percent commission for whjat they do, if you expect them to do a hell of a lot more, like hand holding newbies and pre4paring taxes, the fees will skyrocket and I will get the privilege of paying extended fees to educate my competition. Just read the damn manuals, and if you can’t or won’t, then pay someone to do it for you. The community groups are FILLED with posts by idiots who see dollar signs forcing their way into their front doors and then compalin when reality slaps them in the face. No matter what the bleaters like to go on about “The Sharing Economy” once you charge a penny or more you a running a business, and you better know how to run it, or it will run you into the ground. Read the posts on multiple group;s:
"How do I get paid?"
Do I need insurance?
They stole all my antiques and I don’t understand how security deposits work?
A guest opened a brothel in my AirBnb space and the neighbours are lighting torches, what do I do?
etc.


#19

You are SO right, DR - absolutely - and how many lashes shall I receive? By ‘severely’’ I assume you mean about 40. Will you be the one to mete out my punishment? If so, book a room so you can get my address, and I’ll provide a nice continental breakfast (coffee or tea?).

Just be sure to bring an extra 13% for taxes - in cash - due at check-in. And please communicate estimated arrival time.

If you’d like I could line up a whole host of other humans who’ve made the human mistake of making decisions without having all the important facts.

Before you set the number of lashes I deserve, I will say in my defense that I did NOT do it to see dollars pound their way through my door. I did it with the ‘share’ concept in mind - I have a spare room near a tourist spot and public transportation and it seemed a waste to have it sit empty most of the year. I love to meet new people. I travel with a family of 5 and often just want a simple, budget place to stay. I’d stayed in a number of ‘air’ properties and the hosts raved about how easy it was to do - never mentioning the business grit involved. I just thought I was sharing a spare room with travelers - and really having no idea what a ‘business’ it would turn into, with solid bookings through the summer.

I do understand your frustration with hosts who don’t do their research. I’m one! But I do think ‘air’ could afford to write a bit of code that would ask me what my sales & occupancy tax rate is, then calculate that and add it to the price of the room . I think the reason they don’t is they want to continue with it’s ‘we are the world’ theme and lure other naive people like myself into listing rooms so they can take their fee off the top. The sell false security with their claims of insurance, but if you read the policy, it’s only ACV and not replacement cost, so isn’t really insurance at all. Again, I’m guilty as charged - but that’s also why I’m here, trying to learn.

(And you guys thought beach-guy was harsh!! At least he never threatened a whipping!!)


#21

I think it is more of a head-in-the sand thing. They would rather not think about it or address it until they have to.


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