Do I need a business license to start Airbnb?
Most Popular Reply
Property Manager · San Francisco, CA · Member since 2017 · 74 posts · 71 votes
9yHi Mario-
So here is the deal as far as I can tell. Pretty much any city/county in the United States has what is called an Transient Occupancy Tax (TOT) which is levied on visitors to a given area and normally collected via Hotels, B&Bs, etc. The TOT tax in Inglewood is 14% just like Los Angeles.
TOT tax is applied to any rental for less than 30 days.
If you were going to run your short term rental 100% by the book then yes you are subject to the TOT tax and the traditional way cities (Inglewood included) enforce collection is by requiring business licenses. So if you go down to city hall and say you've got a business renting accommodations for less than 30 days and ask them if you need a business license I am pretty certain they will say yes and be all too happy to take your money.
Now the more practical question is should you do this? I would say no you should not go to city hall and get a business license for a few reasons:
1. You are Los Angels county. AirBnB has a special arrangement in LA county where they will collect the 14% TOT on your behalf from every booking. In fact there is no choice in this matter. Each AirBnB booking you receive will have 14% tacked on to be paid by the guest. AirBnB remits that 14% on your behalf. You don't need to do anything.
2. Inglewood has no STR laws. As far as I can tell Inglewood has no STR laws, permits or regulations. This almost always means there is no corresponding enforcement from the city to try and go after individual operators such as yourself. This is why point #1 exists - cities and counties know tax collection from individuals is very difficult. Getting platforms to do it for them is a very attractive solution.
Inglewood is in the early stages of a progression we have already seen played out in other cities like San Francisco, Santa Monica, Paris, London, etc. Depending on several factors you will see a fair amount of debate in your city and local government on how to treat short term rentals.
One extreme is to ban them altogether similar to what Santa Monica did. Another extreme is to legalize them across the board which is what Arizona did across the state. Most cities are landing somewhere in between where it's permitted but regulated meaning you need a license and there are restrictions. My guess is that Inglewood will eventually adopt something similar to LA but you will have plenty of warning and notice of how that is leaning before it becomes law.
In summary I would say go for it and don't bother with the Biz license for now. List on AirBnB and VRBO and find the sweet spots for your area. I also recommending finding other STR folks like yourself in the area - they can be a font of great info on how to price and manage your STR. Good luck!
21 Replies
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
Hey @Manolo D. so what words should I use then? Trying to find more information on it. I know Los Angeles requires a business license but not sure if Inglewood would require it. But I'm sure many hosts just list their properties without it!
- Investor · South Lake Tahoe, CA · Member since 2017 · 78 posts · 42 votes9y
Before you take step 1, you need to find out what the requirements are for your specific community. Some completely prohibit them. South Lake Tahoe, which is where mine is, has a very specific set of requirements to be met before you receive a Vacation Home Rental license. In SLT you don't want to get caught running a VHR without a license. Your property would be out of business for good.
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
@Bill Cereske I contacted an airbnb host in the area and he said I wouldn't need a business license. Going to ask around a bit more.
- Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes9yMario Furmanczyk I don't have the answer to that but i got a call asking if we can upgrade their units to hotel code due to a city letter. my ballpark bid was 180k min and 220k max for 8 units two storey. they wrote a letter to city that they'll revert to long term. never heard from them again. i'd say list it, the str law is not that stringent, the benefits outway the risk.
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
@Manolo D. So just list it without notifying the city? Perhaps that is the way to go. I think regulations on STR will become more strict in the future. For now, I think the cities are still trying to figure it out. Might as well take advantage now that it isn't super regulated.
thanks!
mario
- Investor · Milpitas, CA · Member since 2015 · 278 posts · 155 votes9y
@Mario F., you really need to just do research on your own city on the actual city website. In San Francisco you need permits to advertise on AirBnB. Thirty miles away in Palo Alto, you don't.
Don't listen to anybody who doesn't work in your area, we're just talking out of our butts.
- Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes9yIn Carmel some homeowners just got sued by the city because of multiple cease and desist letters were ignored. There are many local codes that have various requirements. More touristy spots will have more requirements than small town USA.
- Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes9y
@Aaron T. the treatment of STR is not exactly like regular rentals. It might be true that the circumstances of your STR qualify for schedule E; but not all do.
If you offer any services, or if your average rental time tends to be under 7 days there's a good chance it'll get flagged and should have been reported on Sch C as a business.
- Kapolei, HI · Member since 2015 · 19 posts · 5 votes9y
Maybe look to see who is a Superhost in your area and reach out to them, more than likely they've been doing it a while and can share some of their thoughts with you. Nothing against Non SuperHost but if you're new and starting out you're more than likely trying to work the kinks out yourself.
- Property Manager · Aurora, CO · Member since 2014 · 221 posts · 210 votes9y
I cannot speak for your location, but I suspect any city, county or state that allows STRs is going to want you to pay the appropriate taxes, and for that you will need some kind of license or tax account with those entities in order to do so. This is the reason why so many cities are starting to crack down on people operating STRs "unofficially" (which means without collecting and paying taxes.) It is all of those STRs that are being operated without notifying the city that are motivating the rental restrictions being considered all around the country.
Yes, there are other reasons, mainly big hotel lobbying groups that are militant against STRs because of the business that they are losing to our industry. But they disguise their objections by saying that the operators of "unofficial" STRs are not playing by the same rules since they are not collecting & paying taxes to the city....and they are right.
I personally will not do business unless I can be "legit". Read on....
Recently my husband & I bought a house in the city where our alma mater is located: Lynchburg, VA. This is not a "vacation destination" like the ski resorts in CO or the beach in FL (where we have other STRs) but there is a strong market for STR because of all of the people who visit the city for events at the college. We often visit Lynchburg ourselves so thought it would be a great idea to buy a house that we can use when we are visiting the city and then rent it out to others when we are not there to help pay the expenses.
I did my research and found that there are no restrictions in the city legislation against STRs so we were good to go. We spent 6 weeks buying furniture, appliances, TVs, bedding, linens, kitchen ware.....etc, etc, etc. When we were done the "cottage" was so darling! I loved it.
During those 6 weeks we received 5 bookings which was very encouraging, since I did not know really how well the property would rent in that kind of market.
Three days after we returned home I heard from MyLodgeTax (the service we use to manage and pay the taxes to the various entities for our properties) that the city of Lynchburg would not give us a business license.
What????
I had a long conversation with the City Planner. He said they do not have a plan in place for how to handle STRs in Lynchburg so there was not a "license" I could be given. I said "What? You don't have a way for me to pay the taxes to the city for the bookings that I receive?" He knew that there were some STRs being operated in the city (that were not paying taxes), but just as I suspected the only reason they knew about them is because of complaints that they've received from neighbors. (In other words, STRs are viewed negatively because they only hear about the bad ones.)
He said I could apply for a "Certificate of Conditional Use" which is what hotels and bed & breakfasts have to do, but it is a 6 week process that costs $400, and there is no guarantee it would be approved. Basically, it comes down to a City Council meeting, which is a public hearing where the public are able to voice their opinions for or against the application. I asked him in his opinion would my application be turned down by the Council simply because they don't have a plan for STRs in place and did not want to open that "can of worms" until one is made? He said it was "very likely."
So, we put the house back on the market, were able to honor our 5 bookings, and sold the house exactly 4 months after buying it. We went back to the house, packed everything up and put it in a storage facility and started from scratch.
This time, we went outside the city limits into the County. We found a home (only 4 minutes from the University!), put an offer in that was accepted and went through a 6 week process with the County (whose Commissioner was very encouraging about the chances of success for our application to use the house as a STR when I talked to him before making an offer on the house.) Our application was approved and we are set to close on the new home next week.
Moral of the story: We could have continued to operate the first home without a license, but eventually the city will come to terms with this industry and we didn't want to be out of business if they decide to ban STRs in the city. Also I am not willing to operate "unofficially". I want my business to be properly licensed and approved by the city, county and state in which I am doing business.
I know this was a long tale, but maybe you'll agree with me that it is better to make sure you are operating within the confines of the regulations in your area than not. You'll have peace-of-mind and won't have to worry about crack-downs, fines, having to cancel guests' bookings if you are shut down by the city, etc.
Best of luck!
- Property Manager · Mammoth Lakes, CA · Member since 2014 · 263 posts · 230 votes9y
Hey @Mario F. I would definitely check with the city of Inglewood BEFORE listing your property. It's definitely easier to find out the regulations and costs up front than get stuck with fines and overdue tax fees later. Here we have to have a business license and a TOT (Transient Occupancy Tax) certificate, and the town government actually employs someone to troll Airbnb, VRBO, etc; to find people out of compliance.
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
So far after asking around other airbnb hosts in Inglewood, seems like the city hasn't really caught on at all just yet. There are not many hosts in the area right now. But i'm sure once the big stadium is built, they will start putting rules in place. thank you all!
- Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes9y
Originally posted by @Mario F.:
@Manolo D. So just list it without notifying the city? Perhaps that is the way to go. I think regulations on STR will become more strict in the future. For now, I think the cities are still trying to figure it out. Might as well take advantage now that it isn't super regulated.
thanks!
mario
Yes, it's a risk, and like the big balls from the city makes some law, they want one or two "examples" that are scandalous enough to take notice, if it is non rampant, the city wouldn't mind, but if it's significant enough to get complaints from hotels/motels, then that's when the city takes action and implement laws. I'd make a call to city as per requirement, remember to hide your identity, they are obliged to answer all questions to their constituents and the public under FOI (freedom of information act), ask them anonymously that you have the intent to rent your house or a portion of, what do you need and what steps do you need to do. If they ask specific questions like property address, you are not obliged to tell them and simply say, I am asking under freedom of information act and I would like to maintain anonymity. Said and done. Good luck.
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
awesome, thanks! @Manolo D.
- Property Manager · San Francisco, CA · Member since 2017 · 74 posts · 71 votes9y
Hi Mario-
So here is the deal as far as I can tell. Pretty much any city/county in the United States has what is called an Transient Occupancy Tax (TOT) which is levied on visitors to a given area and normally collected via Hotels, B&Bs, etc. The TOT tax in Inglewood is 14% just like Los Angeles.
TOT tax is applied to any rental for less than 30 days.
If you were going to run your short term rental 100% by the book then yes you are subject to the TOT tax and the traditional way cities (Inglewood included) enforce collection is by requiring business licenses. So if you go down to city hall and say you've got a business renting accommodations for less than 30 days and ask them if you need a business license I am pretty certain they will say yes and be all too happy to take your money.
Now the more practical question is should you do this? I would say no you should not go to city hall and get a business license for a few reasons:
1. You are Los Angels county. AirBnB has a special arrangement in LA county where they will collect the 14% TOT on your behalf from every booking. In fact there is no choice in this matter. Each AirBnB booking you receive will have 14% tacked on to be paid by the guest. AirBnB remits that 14% on your behalf. You don't need to do anything.
2. Inglewood has no STR laws. As far as I can tell Inglewood has no STR laws, permits or regulations. This almost always means there is no corresponding enforcement from the city to try and go after individual operators such as yourself. This is why point #1 exists - cities and counties know tax collection from individuals is very difficult. Getting platforms to do it for them is a very attractive solution.
Inglewood is in the early stages of a progression we have already seen played out in other cities like San Francisco, Santa Monica, Paris, London, etc. Depending on several factors you will see a fair amount of debate in your city and local government on how to treat short term rentals.
One extreme is to ban them altogether similar to what Santa Monica did. Another extreme is to legalize them across the board which is what Arizona did across the state. Most cities are landing somewhere in between where it's permitted but regulated meaning you need a license and there are restrictions. My guess is that Inglewood will eventually adopt something similar to LA but you will have plenty of warning and notice of how that is leaning before it becomes law.
In summary I would say go for it and don't bother with the Biz license for now. List on AirBnB and VRBO and find the sweet spots for your area. I also recommending finding other STR folks like yourself in the area - they can be a font of great info on how to price and manage your STR. Good luck!
- 9yMario F.Los Angeles, CA · Member since 2016 · 160 posts · 21 votesOP
@Carlos Carbajal great thank you!
- Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes9yI have 1000 units and don't have a "business license". At least that I know of. What happened to our country where we feel we need permission from the state to even rent out a space in our own home :-(
- Real Estate Agent · Inglewood, CA · Member since 2015 · 294 posts · 150 votes9y
For long term rentals Inglewood only charges $20 per year, per unit. I would get a business license but I don't feel obligated to tell them if I'm renting long or short term, renting is renting. Though they ask, I don't even divulge my income to them since the fee for the license is a flat rate.
- Long Beach, CA · Member since 2016 · 1 post · 1 vote7y
Hi, Mario.
Did you start your AirBnB? I use to have an AirBnB in Bakersfield and it was quite lucrative. I’d like to buy property in Inglewood and do either an AirBnB or CrashPad. Do you have any words of wisdom as I do my research and start my journey?
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