Understanding how Airbnb tax collection happens (or doesn’t)
- Apr 24, 2018 | Jennifer Sokolowsky
Operating a short-term vacation rental means, in many places, that you also need to collect tax on the cost of that rental and pass it on to tax authorities — just like hotels do. With the rapid growth of the short-term rental industry over the past 10 years, governments are realizing the revenue potential in this area and increasingly looking for ways to make sure they capture as much of that tax money as they can.
One solution gaining popularity is to have Airbnb, the leading online short-term rental marketplace, collect this tax on Airbnb bookings. This way, governments get a much higher collection rate than they would if they relied on individual operators to comply, without having to expend resources on tracking down short-term rental hosts.
In most places, this is done through a voluntary agreement between Airbnb and the taxing authority, although a few places have laws requiring all online rental platforms to collect and remit the tax. These agreements largely allow Airbnb to keep information on individual hosts to itself without having to turn it over to the authorities — which some critics say makes it impossible for governments to know where short-term rentals are being operated or whether Airbnb is remitting the correct amount of tax.
Nevertheless, these kinds of agreements seem attractive to governments, and Airbnb has been proactive in pursuing them, with more than 350 such deals worldwide. Airbnb is the only major online rental platform that voluntarily collects taxes for it hosts. HomeAway and VRBO, for example, do not generally collect lodging taxes for their operators.
In places where Airbnb does have tax deals, it automatically adds accommodations taxes to the price of the booking, collects that amount, and pays it to the proper tax authorities for operators. This makes it really easy for hosts to comply with lodging tax requirements.
Knowing what you owe
As happy as you might be to have Airbnb take care of the heavy lifting on lodging taxes, you can’t forget that the tax obligations on your short-term rental are ultimately your responsibility. It’s up to you to make sure you’re complying with tax rules — with or without Airbnb’s help.
It’s crucial to understand that since Airbnb only collects lodging taxes on behalf of hosts for jurisdictions with which it has an agreement, it may not collect all of the taxes you owe.
State of Airbnb state agreements
Airbnb has agreements with most states — plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands — to collect lodging taxes on behalf of short-term rental hosts who use Airbnb as their online booking platform. However, there are exceptions: Delaware, Georgia, Hawaii, Indiana, Massachusetts, Minnesota, Montana, Nebraska, and West Virginia. If you operate a short-term rental in any of these states, Airbnb will not collect any state short-term rental taxes for you.
Patchwork of taxes
State taxes are only one layer to think about when you’re a short-term rental host. Most of the time, lodging taxes are a conglomeration of taxes from various jurisdictions. The final tax rate you charge your guests could include a state tax, a county tax, a city tax, a special district tax, or any combination of those.
Not only that, but each tax may need to be filed with its own jurisdiction. Sometimes the state will collect county, city, and other taxes as well, but in other cases, the state only collects its tax, while other jurisdictions collect their taxes separately. That means that you must register with each jurisdiction that administers lodging taxes for your property, collect all taxes at once when you charge your guests, and remit taxes to each jurisdiction.
For example, in Florida, Airbnb has an agreement with the state to collect the state’s 6 percent Transient Rental Tax as well as a local Discretionary Sales Surtax of 0.5 to 1.5 percent, which varies by county. Both of those are remitted to the state.
Airbnb also collects Tourist Development Taxes of 2 to 5 percent for 25 counties administered by the state: Bradford, Citrus, Columbia, Desoto, Dixie, Flagler, Franklin, Gadsden, Gilchrist, Glades, Hamilton, Hardee, Hendry, Highlands, Holmes, Jackson, Jefferson, Levy, Madison, Okaloosa, Okeechobee, Pasco, Sumter, Wakulla, and Washington.
Airbnb has also made separate deals with other 16 counties: Brevard, Broward, Charlotte, Hernando, Hillsborough, Indian River, Lee, Leon, Miami-Dade, Orange, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, and Taylor. So if you live in one of those counties, Airbnb will collect all state and county taxes for you.
However, there are municipalities within those counties that have their own resort taxes. Airbnb has a tax agreement with only one Florida city, Surfside, where Airbnb collects a 4 percent resort tax on top of the taxes for the state and Miami-Dade County. If your property is located in another city, such as Miami Beach, that charges its own separate resort tax, you’ll be responsible for collecting that tax yourself.
Likewise, if your Florida rental is located in a non state-administered county without an Airbnb agreement, you’ll responsible for collecting and remitting the county tax on your own.
That’s just one example of one state — and each state has its own taxes and rules. It’s up to you to figure out what the lodging tax requirements are in your location.
Tackling lodging taxes
Airbnb’s tax collection efforts can help short-term rental operators out with tax compliance, but often, that’s not the whole story. Hosts not only need to be aware of their tax obligations in all the jurisdictions that apply, but make sure they’re charging the correct tax rate and remitting the right amount to the right jurisdiction. Getting it right can be complicated and confusing.
However, Airbnb hosts can get help. MyLodgeTax is a service that manages lodging taxes for short-term rental hosts, including registration, charging the correct rate, and remitting taxes to authorities. In jurisdictions where Airbnb does not collect lodging taxes — or where it only collects some of the taxes due — MyLodgeTax can relieve hosts of the unwelcome burden of lodging tax compliance.