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Who’s responsible for filing lodging tax returns?

  • Oct 18, 2017 | MyLodgeTax

Lodging tax (also known as occupancy tax, room tax, accommodations tax, bed tax, hotel tax, and more) can be an unfamiliar concept for many property owners venturing into short-term vacation rentals for the first time.

Lodging tax is not related to income tax

For starters, income tax and lodging tax are completely different and should not be confused. Most people are familiar with income tax and paying a certain percentage of personal or business income to the government for taxes. However, lodging tax — actually paid out of pocket by renters or guests — is a percentage of the cost of lodging.

When you file an income tax return, usually once a year, you report how much tax you’ve already paid to the government — either through payments or withholding from paychecks. You then either receive a refund (yay!) if you’ve paid too much or you pay any balance owed (boo!).

But lodging tax works differently. Lodging taxes are a form of sales tax on lodging transactions. While they’re paid by the guest staying in a short-term rental, vacation home, hotel, etc., the taxes are collected and filed by the host providing the lodging and receiving the payment.

This means that while hosts do not pay lodging taxes out of their own pockets, they are responsible for collecting lodging taxes, filing returns, and remitting tax payments to the government. These taxes are commonly required to be filed monthly or quarterly.

The host is ultimately held responsible for lodging tax

Even if hosts get help filing lodging taxes, they’re ultimately responsible to make sure it gets done right. Getting it right can help to avoid interest, penalties, and back taxes owed that can result from neglecting lodging tax obligations.

For example, in some areas, Airbnb collects and files lodging taxes for property owners who use its platform for bookings. However, Airbnb may not collect all of the lodging taxes owed. Often hosts owe lodging taxes to more than one jurisdiction. For example, as a host you may owe lodging taxes to the city, county, and state where your property is located. Even if Airbnb collects and files state lodging taxes on your behalf, it may not collect city or county taxes; you would be responsible for filing these taxes yourself. In fact, while Airbnb collects and files lodging tax on vacation rentals in most states, they only collect local taxes in a few locations.

Since it’s up to you to make sure all lodging taxes are being collected and filed, it’s crucial to know which jurisdictions govern your property, what lodging tax rates apply in those jurisdictions, and what their individual requirements are for filing lodging taxes.

Even if you have a property manager, accountant, or automated solution assisting with filing your vacation rental taxes, you’re still ultimately responsible. So if you do get help, it’s important you trust that resource to be vigilant in making certain the most current tax rate and compliance requirements are considered and calculations are accurate. Outsourcing lodging tax filing can free up your time, but it’s still your name on the line if anything’s wrong, so it’s important for you to trust it’s being done correctly.

Taking care of lodging taxes may not be your favorite part of owning a vacation rental property. But ultimately, it’s your responsibility to ensure lodging taxes are handled properly.

Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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Avalara Author MyLodgeTax
At Avalara MyLodgeTax, we provide the fastest and easiest way for short-term and vacation rental property owners to comply with their lodging or occupancy tax requirements. We manage your lodging taxes so you don't have to and guarantee your compliance — period. If we make a mistake, we'll fix it at no cost to you. No contracts, no obligation, no worries. Never worry about lodging taxes again. Contact us at MyLodgeTax@Avalara.com.