Vacation Rental & Taxes: You Should Care About CA Vs AirBnb!

11 Replies

Recently, a bill was introduced by the California State Senate that would require Airbnb, HomeAway, VRBO and other short-term rental platforms to share rental data with local governments. Why does that matter? In Santa Cruz county, there is an 11% short term occupancy tax that a number of people have been bypassing when they went a room in their home for a week. Now they would have the data to hunt you down. =)

If you happen to be in the vacation rental business and this affects you (ahem J. M. etc), you might want to check it out and email your rep or at least prepare for the impact.

The legislation will be heard by the Senate Governance and Finance Committee on Wednesday, May 6th and the Senate Judiciary Committee on Tuesday, May 12th.

http://www.leginfo.ca.gov/pub/15-16/bill/sen/sb_05...

Good info @Shane Pearlman , always good to have a heads up on that, thanks!

I always see those costs passed on to the client, but you still have to collect and report it - as I am still getting into it my property manager handles it, but if you are doing your own and how sure how, I found this site and have it in my bookmarks for when I do end up self-managing a property:  https://www.hotspottax.com/

I can understand people not wanting to have to pay the tax. However; hotels have to pay it, therefore; why should private homes be exempt. The problem with trying to get around it is that local governments will pass ordinances that prohibit vacation rentals in their cities because they undercut the tax base. Sometimes you just have to pay to play! Hotels are putting a lot of pressure on local governments over this, and it makes sense to pay the tax.

Also,@Shane Pearlman    @Levi Bennett  Watch for the new Vacation Rental Forum coming soon! 

In Maui they are cracking down on those vacation rentals that have not registered w/ the state to get the tax ID.  Part of it is they definitely want the tax money coming in, but also there are many that are renting part of their house or ohanas (small cottages on their property) out as a vacation rental instead of long term rentals.  As more and more residents were doing this, the state was worried about the amount of affordable long term rentals available for residents (and I'm sure they got some pressure from some of the resort hotels). 

 It's now harder to get approval and a tax ID for a vacation rental for your house/ ohana.  If you have a property that's a condo, especially near the beaches, then it shouldn't be too much of an issue.  

State of Hawaii makes it easy to report collected taxes and you can report your quarterly taxes easily online and make the payment online.  You basically put in how much rental income you brought in, they compute the tax amount and you agree and pay online.  The tax of course gets passed to the guests and we've never had a guest complain about paying the 13.42% tax.

@Shane Pearlman

I'll have to check this out & see if this could potentially be happening in Texas as well. Thanks for sharing! 

most if the time you can just pass this on in the booking fees same as hotels! So definitely check if you can just pass it on

I know in San Clemente, where we are currently building a home; and are in the process of completing plans for submittal on 2 condos,(the house and condos are both great options for vacation rental properties) they are "vacation rental" friendly. In fact, most of the coastal areas of Orange County are. Though they do require taxes be paid, the fact that they are so accepting of the use and encourage it is to be commended.

Here's the info on San Clemente: 

San Clemente Vacation Rental Registration

I think municipalities have no altruistic motives concerning vacation rentals.  Currently they very much like the AirBnB phenomena, as many city's, like mine, get a lot of extra tax revenue from it while providing no extra services.  The real problem is going to come later.  Once the hotel lobby gets more organized and realizes what a huge threat this movement is they are going to spend unprecedented amounts of time and money lobbying politicians to regulate the stuffing out of it.  My AirBnB concierge, who is managing some of my rentals, told me that 75% of new bookings are first time users.  I think that tells you that this gravy train isn't going to have a smooth ride indefinitely.  Not only because of the lodging industry getting cannibalized, but once the money hungry city's realize the amount of lucre they aren't siphoning off effectively they will be even more prone to get in the mix.

Santa Monica is trying to do a 14% tax and require Home Owners to remain in the home while it is being rented in the short term rental.  Check out this article! 

http://www.citylab.com/housing/2015/05/santa-monica-just-outlawed-80-percent-of-its-airbnb-rentals/393401/

@Joseph C In April, you and I spoke about this and being taxed by IRS at hotel rates, etc.  Perhaps these postings explain it better, because I did not pursue the conversation with my accountant advised "no".

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