Hotel/Sales Tax -- paid for by renter via AirBnb??

24 Replies

I'm in massive research mode for first STVR investment.  Feel I have a pretty good handle but surprises still come up!  I am looking at an area that has a   6% hotel tax and 7% sales tax.  I have been putting these numbers in my spreadsheets to estimate profit/cash flow.  Obviously at 13%, it takes a chunk for sure but the properties I am looking at still look good.

Well.... learning today in a few places that AirBnb charges the renter the occupancy tax? How do they determine how much?  Assume it is not in the advertised price (like a Hotel), just tacked on in the final fee? 

#1 is that correct?

#2 Does AirBnb pay it directly to the jurisdiction the property is in or to they remit back to me?

#3 I heard AirBnb is the only one that does this (not the others like Bookings.com, VRBO/Home Away.  Is that true? If so, that's fine, assume you just have to account for it on your own if the property rents via those platforms.

Thanks!

Yes Airbnb takes it out needed or not. Homeaway/VRBO leaves it up to you to handle.

I believe Airbnb charges the end user like a hotel does.

Airbnb handles all the taxes to municipalities depending on your locale which is a huge deal. It appears Airbnb is in talks to buy HomeAway (parent company of VRBO, HomeAway, vacation rentals.com) in the near future. If that happens you will see a much better run organization.

@Sean Wilt it depends on your city and state and regulations change often. I’d call 855-4-AirBnB VRBO gives you the option to charge it to the guests but you’re on your own for filing.

You have to be careful with taxes. Ask Airbnb what exactly they collect. They don’t always have agreements in place to remit taxes even though it is taxable revenue. In my area, I recently found out that Airbnb collects state tax but not county tax. That came as a surprise b/c I just assumed that they collected both and didn’t run the calculations to understand what exactly is being charged. 

Michael, apparently Expedia is exploring options to spin off HomeAway. Nothing imminent but exploring options. I’m sure Airbnb offered a dirt cheap price. HomeAway was terribly run from the get go and now the warts and hairs are becoming evident. 

Ok, cool.  thanks all.  So, assume they just add the collected taxes to the fee they send me via the rental.  Makes it easy.  Understood, I need to understand exactly what they collect so I'm not caught by surprise.

So, if only AirBnb collects fees, do you increase the rental fee on other platforms by 5% or 8% etc. to #1 be sure you collect some tax relief from the renter, but #2, levelize the fees accross platforms for the customer searching multiple sites?

@carl lucas Just re-read your post where you can option VRBO to add in the tax.  That answers my question on keeping fees consistent accross platforms.

Thanks!

@Sean Wilt You need to talk to AirBNB (or read in their support articles) to find out IF they collect taxes in your jurisdiction, and if so, which one(s), and then, IF they remit them on your behalf.  This is very, very market-specific and does not by any means cover all of them.

I'm in one market where they do not collect the 10% occupancy tax I'm required to pay.  I just roll it into my nightly rate.

I'm in another market where AirBNB collects and remits the 9.75% state tax and 3% lodging tax - that money never comes to me, they add it on to the guest charges and (apparently) remit on my behalf.  I'd like a bit more transparency about the process, but can't beat the convenience.

@Eric A. That's the first I've heard about a possible HA acquisition but I'd definitely love it, I'm a big fan of AirBNB's platform and would like to see VRBO's interface become more user-friendly.  Time will tell, I suppose... 

I just went on AirBnb site and picked a couple of listings in my target market.  (Savannah).  The breakdown shows the nightly rate, the cleaning fee, and the service fee (which I assume is what AirBnb keeps for their service).

I don't see any charge for the tax.  Does that just add on when the renter's credit card is charged?  

@Julie McCoy if I just add in the tax (13% in this case) to the nightly fee, and others don't in this market, than I run the risk of being over priced correct?  

Despite my countless hours of research gearing up for my first purchase in a couple of months, I still have some basic questions so I appreciate everyone's help!

@Sean Wilt Wow! Reading some of the other responses has been educational to me! I would have assumed you would have had to let airbnb know what the tax rate state, county, and town, and have them charge the end user and you collect that and then you file the appropriate returns with state county and city where applicable. Some of the responses seem to indicate that Airbnb files for you. If so, that is awesome! I would still check that airbnb is charging the correct amount of tax and ask that they provide you some confirmation that the taxes were properly submitted to the taxing authority.

@Jamie Engledow I would have thought it works exactly as you said too!  Seems strange to me that they would actually file for you.  I would think not all filing requirments/dates are the same.  I know in Savannah, taxes are due by the 20th of the following month. 

I would like to be in control of that piece as well.

Since I haven't set up my listing yet, maybe it will all become more clear when I do.

I agree with you though, lots of great info from the feedback!

There are 3 paths that Airbnb can follow: 1. You’re in a market where they handle it. (Mine aren’t) If your market is one of these you don’t worry about collecting (still need to file per city, county state fed requirements) 2. You’re not in the market. You add the taxes to your nightly rate. If others aren’t also doing this then yes, you’re overpriced and bookings will suffer. 3. You’re not in the market. You add a disclaimer saying Airbnb doesn’t collect but any booking are responsible for XX percent and you will invoice them a week before their arrival for the taxes. I do #3. It is allowed per Airbnb rules (I called to confirm) as long as it is clearly disclosed in the listing. I put mine both at the end of the description and one other section so it’s listed twice. Haven’t had any complaints yet

@Sean Wilt -  I run a furnished rental business with 8 units in San Francisco and just south, and my  bookings are 30+ days. In addition to much less effort than Short Term Rentals, 30+ day bookings have no hotel taxes (14% in San Francisco). This “semi-passive” model works well for me and might be worth considering depending on how involved you want to be in managing your place day-to-day.

@Sean Wilt -

Here in Central Florida, Airbnb pays the local sales tax (7.5%), and vacation rental homeowners pay the Florida state sales tax (6%).  What we do to compensate for this is we add 7.5% to the nightly rate knowing Airbnb will be taking the 7.5% and paying the county directly.  Here's a comparison of our Airbnb quotes vs. our HomeAway/VRBO quotes . . .

If our nightly rate charge without any sales tax added for a short term rental is $200 -
For HomeAway/VRBO we would charge a renter $200/night + 13.5% local and state sales tax.
For Airbnb we would charge a renter $215/night ($200 + $15 (7.5% local sales tax) ) + 6% state sales tax.  We end up netting the same amount.

It is somewhat confusing.  I think there may be a lot of vacation rental homeowners that double pay local sales tax here not realizing the above.

Good luck with your pursuit.

Keith

@Keith Courtney Thanks Keith.  Makes sense and easy enough.  Yeah, I bet tax IS being double paid in some instances.  I searched around at some actual AirBnb listings last night and found only 1 that said in the description "sales taxes may be added".   None of the fee breakdowns showed tax though.  Do you know, is this just added to the customer's charge when they purchase and is not disclosed anywhere?

Would be nice to be able to add a line item to the cost breakdown so everyone sees it.  If we add the tax to the nightly rate as you illustrated, that can distort listing pricing vs. competition.  It can also distort RevPAR and ADR data on sites like AirDNA.

Anyway, thanks for your feedback.  I need to really call AirBnb and see what the plan is in my jurisdiction.  

@Sean Wilt -

In our counties here in Central Florida, the sales tax that Airbnb pays to our local counties is taken from the total proceeds of the reservation.  In my example above, if we didn't add the 7.5% to our nightly rate, we would net from Airbnb $200/night minus the 7.5% local sale tax, which would be $185/night. 
We show the 6% state tax that is collected from the renters as a separate charge, and it is added to the reservation total that the renter pays.  We then take that state sales tax that we collect and pay the state.  Airbnb pays the local sales tax that they collect directly to the appropriate county.
This is confusing.  I wish Airbnb didn't pay the local sales tax.  It would make things simpler.  No other vacation rental websites do it that I know of.

Keith

@Sean Wilt Hi Sean, I looked at Savannah as well. I thought I saw that they were tightening things up there for Airbnb, reducing the number of permits they allowed, which scared me off a bit. Not sure if that’s been sorted out or if it has to do with different areas of Savannah, but thought I’d mention it.
Originally posted by @Eric A. :

Airbnb handles all the taxes to municipalities depending on your locale which is a huge deal. It appears Airbnb is in talks to buy HomeAway (parent company of VRBO, HomeAway, vacation rentals.com) in the near future. If that happens you will see a much better run organization.

 I disagree!!! Airbnb is guest focused and as an investor I much prefer the VRBO platform. A consolidation will be TERRIBLE for VR owners. Less choice, we'll be locked into working with just them, at their terms. I'm horrified at the idea.

I used to think Tim was an old man for thinking like this because AirBnB is more geared towards young folks. But lately I’m ready to ring AirBnB’s neck for ALWAYS taking the guests side even when they’re first time users and I’m clearly a rockstar.
@Lucas Carl, ive had issues with Airbnb also. Specifically cancelling within my strict policy (I require 61 days notice or no refunds). Airbnb will, ‘on a case by case basis’ (read as ALWAYS) get guests around my policy and issue refunds. File a complaint with the BBB. Airbnb takes the BBB seriously and has always reached an acceptable resolutIon with me. (they pay out the reservation).

Well maybe I'm a bit of both. Call it middle aged. But the point is that while ABB may be geared toward the future, they're very biased. I don't want to get off track here, but I recently had a guest cancel a $2,000 stay two weeks before arrival. According to ABB policy, she was entitled to 50% refund. She told me (through the ABB messaging system) that some of her group had backed out so she wanted to cancel. I directed her to the policy and gave her 50% refund. She then went to ABB and claimed an Extenuating Circumstance, which is B.S. because EC basically means someone died or is seriously Ill, a very short list of reasons. ABB gave her 100% refund and left me with an empty cabin in peak season wondering WTF just happened to me. Actually, I know what happened to me, I just can't say it in public but let me tell you it hurt.

Is it a common practice to be required to pay both sales tax and hotel tax with STR? I was looking into a STR property in Pennsylvania (PA sales tax is 6% and hotel tax is 6%). I was assuming only the hotel tax of 6% would apply to STRs and not an additional 6% sales tax. Am I wrong?

When I look at listings on Airbnb in PA, they only charge the state hotel tax of 6% (Plus additional local hotel taxes if applicable)...Am I still responsible for an additional 6% sales tax?