Lodging tax timing trauma - an example
- Aug 1, 2016 | MyLodgeTax
Let’s look at a quick example.
Guest: Randy Renter
Nightly rate: $200
Number of nights: x 5
Total rental revenues: $1,000
Mandatory cleaning fee: $50
Total taxable revenues: $1,050
City tax rate: 4.2%
County tax rate: 3.5%
State tax rate: 2.1%
Total tax rate: 9.8%
Taxes charged: $102.90
Total fees charged Randy: $1,152.90
Although you are required to collect the $102.90 in taxes from Randy, it is not your money. You are a “pass through” entity between your guest, Randy, who is paying the tax, and the taxing authorities. However, it is you who are responsible for collecting the tax and remitting it to the city, county, and state tax authorities.
Back to our example. The amount due to the individual tax authorities is:
Taxes due
City (4.2%): $44.10
County (3.5%): $36.75
State (2.1%): $22.05
Total: $102.90
Filing frequency
City: Monthly
County: Quarterly
State: Annually
In this example, you would have to file, at a minimum, a monthly return of $44.10 to the city. If it’s not the end of a calendar quarter, you would have to hold on to the $36.75 in tax to the county until it’s time to file your quarterly return. Similarly, you would have to retain the $22.05 owed to the state until the annual return is due. If it’s the end of the year, you’d have to file all three separate returns to the city, county, and state. Oh, and those months you don’t rent? You’re still responsible for filing a return for $0 to the city. Yep. Can’t make this stuff up!
By now, you should be starting to get a sense for how the complexity of lodging tax compliance can quickly increase – especially if you have multiple properties. Our guess is that you’d rather not have to deal with lodging taxes so that you can focus on other things – like renting your property and keeping guests happy. But that’s just a hunch! If you’d like to simplify your life, leave the taxes to us.