Occupancy taxes, also known as lodging, room, or tourist taxes, are a crucial aspect of operating a short-term rental. These taxes are percentages added to a guest's bill and remitted to state or local tax authorities.
Occupancy Taxes vs. Income Taxes
It's important to distinguish between occupancy taxes and income taxes, as understanding the distinction is crucial for tax compliance.
Occupancy taxes
Similarly to when you stay at a hotel, occupancy taxes are charged to guests of short-term rentals and added to the cost of their stay. While technically paid by the guest, these taxes are ultimately reported and remitted to the government by either the marketplace (for example, Airbnb) or the host (you, the owner, or the property manager). While reporting varies by jurisdiction, often these filings are required monthly by a certain date on the month following the reporting period.
Income taxes
Income taxes are paid on the revenue you earn as a host and are reported on your personal or business tax return.
What Airbnb Hosts Need to Know
Airbnb's Role in Tax Collection
Airbnb provides significant assistance to hosts by collecting and remitting certain occupancy taxes on their behalf. This service greatly simplifies the process for many hosts, and is a major advantage of listing on Airbnb vs. other marketplaces, which in our experience do not provide such service as comprehensively. In the cases where Airbnb does the collection and remittance on behalf of hosts, it also does the filing (reporting), which covers an otherwise major administrative burden for the host.
Host beware: Airbnb does not collect all occupancy taxes everywhere
While Airbnb's assistance is substantial, it does not cover all taxes in every jurisdiction. There are cases where Airbnb will collect and remit occupancy taxes at a certain level (for example, state), but not at another level (for example, county). Hosts should never assume that Airbnb handles all tax obligations. Furthermore, Airbnb's involvement in geographic regions can change over time based on changing regulations in certain markets. In other words, just because Airbnb collects and remits occupancy taxes in your area when you first create your listing, hosts should not assume this will remain the case in perpetuity. It's best to periodically check the coverage in your areas.
Host Responsibility
Despite Airbnb's help, the ultimate responsibility for tax compliance lies with the host. Hosts must understand their specific tax obligations and ensure full compliance.
Checking Airbnb's Tax Collection for Your Listing
- Go to your Listings and select the specific property.
- In the Listing editor, click on "Edit preferences," then "Taxes."
- Look for "Local taxes collected and remitted by Airbnb" to see which taxes Airbnb handles for your area.
Additional Host Duties
- Register your property with relevant tax authorities (state and local).
- Determine applicable tax rates for any taxes not collected by Airbnb.
- File and remit taxes not covered by Airbnb's collection service.
- Keep thorough records of all transactions and tax-related activities.
Occupancy Taxes When Listing Outside of Airbnb
When hosts list their properties on platforms other than Airbnb or through their own websites, tax management becomes significantly more complex:
- Tax calculation, collection, and remittance are often entirely the host's responsibility.
- This increased burden should be carefully considered by any host or potential host.
- Other platforms like Booking.com and VRBO may have different policies regarding tax collection.
Leveraging Local Expertise
One of the best ways to understand these complex matters is to consult a local expert agent. An agent who specializes in short-term rentals and manages properties themselves can provide invaluable insights and guidance tailored to your specific market, and connect you with professionals who can help you understand the steps to take to remain compliant.
Key Takeaways for Hosts
- Airbnb provides valuable assistance with occupancy tax collection, but it's not comprehensive.
- Hosts must actively research and understand their specific tax obligations.
- Compliance ultimately remains the host's responsibility.
- Listing on multiple platforms or independently can significantly increase the tax management workload.
- Consulting with local experts can help navigate the complexities of occupancy taxes in your area.
By understanding these aspects, Airbnb hosts can better navigate the complexities of occupancy taxes and ensure compliance with all relevant tax authorities.
