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What are people doing about bed taxes?

#1

My sister just finished running her fist year of Airbnb in Vermont and based on what we read in the company’s materials- she started having people pay her the cash bed tax. Several people who are hosts have cautioned her that paying the bad tax to the state may open up a can of worms. Indeed- we have found out from the state that you have to apply for a license of some kind just to pay the bed tax- although the state says there is nothing really to it. What are other people’s experience with this and is anyone out there operating an Airbnb in Vermont and how are you handling this?

#3

Get the license, collect the taxes and send them in. EZ

#4

The licenses are pretty cheap to obtain. Also, beyond the state, the county or city may also be seeking a lodging tax. Finally, for liability purposes, you may wish to also file the paperwork to form an LLC. I suppose that will depend on your location. That way, if a guest happens to sue you, only your business-related assets would be subject.

Last, but not least, it may also be beneficial to talk to your insurance agent about what changes might be needed to insure your vacation rental.

Sorry, they don’t all apply to the tax question, but, since you’re working on getting ducks in a row, it seemed like a good time to lob those out there.

#5

Oh come on, that’s a little harsh. It probably applies to 90 percent of the Airbnb users out there. In fairness, most people are just renting a room in their house. Quite frankly, I thought I was operating a business too, but when it came time to visit the CPA, I was told I wasn’t eligible to take business deductions, only the rental deductions.

At least this woman is trying to be compliant. Give her a break.

#6

That’s the key. When you visit the revenue office, they’re quite impressed you reached out to them at all.

There is a lot of confusion around taxes and licenses when it comes to these types of arrangements. Some localities take monthly receipts while others collect quarterly or annually. Some places don’t collect until you reach a certain number of nights per year or a certain dollar threshold.

Beyond that, you have to figure out where to send the money and what accompanying information is required.

Ultimately, the late filing/submission fees are far lower than the penalties they will charge if you don’t submit at all.

1 Like
#8

Every airbnb host in my county is renting out their spaces illegally, unless every single one of their guests are renting out their rooms/ homes for more than 30 days. In Montgomery County, Md its illegal to have short term rentals (30 days or less). But county executives realize that despite this county law people are going to rent their rooms out anyways. So as long you pay taxes on your illegal income they says its fine.

Edit: every host used to be renting it out illegaly but was advised to still pay taxes. It only recently, since Feb 2nd, became legal to host.

#9

No, they told me I still had to collect tax, both accommodations and excise. I am fully in compliance with the law and I have a license. What happens on my taxes seems to be another story.

#12

Well you only need a license if you actually rent to more than two people: “An owner/occupant landlord can rent rooms to two individual tenants without obtaining a rental facility license. However, if an owner rents to more than twotenants, the property could be considered a rooming house, and the owner may need to obtain a license from the Montgomery County Health Department”

If you don’t rent to more than two people you don’t need a license.

#13

O wait I just realized that I misread the document. Just in case anyone from Montomgery County, MD is reading I don’t want to misinform them. It still illegal to have short term rentals. A bill was introduced Feb 2 which would make it legal. A public hearing is on March 8th, which I will be attending. So still illegal but you should def. pay taxes on your illegal income.

http://montgomerycountymd.granicus.com/MetaViewer.php?view_id=149&event_id=4538&meta_id=96673

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