6 short-term rental tax registration and filing tips for property managers
- Jan 27, 2020 | Jennifer Sokolowsky
As a property manager, taking care of lodging taxes for your short-term rental clients is an increasingly valuable service. Short-term rentals are currently in the spotlight, a growing number of communities are taxing them and enforcing those taxes, and as a result, short-term rentals simply can no longer fly under the radar.
But compliance can be complicated. This creates an opportunity for property managers — but also requires new knowledge and processes. Tax registration and filing with local authorities are crucial to that short-term rental compliance process. Here’s what you should know.
1. Know your tax jurisdictions
Before you can do anything related to short-term rental lodging taxes, you need to know which tax jurisdictions govern your clients’ rentals. This could be the city, county, state, another jurisdiction, or a combination of any of these. You should be able to find information on taxes, registration, and filing on state and local government websites.
Each jurisdiction will have its own rules, processes, taxes, and rates — and it’s key to know those specific rules in order to get your clients’ taxes right. Keep in mind that several kinds of taxes may apply to your clients’ short-term rentals, including sales taxes and accommodations taxes, which may be called hotel taxes, tourist taxes, bed taxes, transient taxes, occupancy taxes, and more.
It’s also important to know which jurisdictions administer lodging taxes that apply to your client. In some states, such as Utah, all state and local lodging taxes are reported to the state tax authority. In others, such as California, there is no statewide lodging tax, so lodging taxes are only reported to local jurisdictions. However, in many places, you may be required to report some lodging taxes to the state and other taxes to local tax authorities.
2. Register to get the ball rolling
Before you can start collecting lodging taxes from your clients’ guests, the tax authorities need a record of the property, and you’ll usually need to get a tax license or permit. You may register in a client’s name, or you may register as a manager on behalf of a client, depending on the jurisdiction. Again, you may be required to register with more than one tax authority, depending on the rental’s location.
You should be able to apply for your tax permit online, and you may be required to pay a fee, depending on the jurisdiction. When you register, you should receive more information about next steps from the tax authority.
3. Learn your filing rules
After you’ve registered, you’ll be ready to collect lodging taxes from your clients’ short-term rental guests. The tax is usually calculated as a percentage of the cost of the rental and added to the bill.
Once you start collecting lodging taxes for your clients, you’ll need to file lodging tax returns and pay the tax you’ve collected. As part of the registration process, you’ll be assigned a filing frequency, which could be weekly, monthly, quarterly, or annually, depending on the jurisdiction and the amount of revenues being reported.
A growing number of jurisdictions require lodging taxes to be filed online, but there are still many jurisdictions that allow paper filing. Keep in mind that due dates may be different depending on whether you’re filing electronically or on paper.
4. Pay attention to due dates
It’s critical to pay attention to your lodging tax return due dates; you may have to pay penalties if you miss them. In Tennessee, for example, the penalty for late filing is a minimum of $15, and that can grow to a fee of as much as 25% of the tax due. In many jurisdictions, you’re required to file by the deadline even if you have no short-term rental income to report for the period.
Each jurisdiction has its own filing due dates, so if your client is registered in more than one jurisdiction, you may have several filing due dates within the same period. Even within one jurisdiction, you may be required to file different forms for different types of taxes.
When you file, you’ll enter information about your short-term rental revenues. You’ll also need to pay the tax amount due, usually via check or electronic transfer. Most jurisdictions also allow credit card payments, but you may be charged convenience fees for this type of payment.
Some jurisdictions may offer you a small discount on the amount of taxes due if you meet your deadline. For example, in Florida, when you electronically file a sales tax return for a short-term rental and pay on time, you’re entitled to deduct a collection allowance of 2.5% of the first $1,200 of tax due, not to exceed $30.
5. Be aware of tax collection by short-term rental platforms
Some short-term rental platforms, such as Airbnb or Vrbo, automatically collect tax for their listings in some jurisdictions. If this is the case for your clients, make sure you’re aware of how that may affect the registration and tax return filing process.
6. Automate for efficiency
Short-term rental lodging tax management is complex — and it only gets more complicated when you have several clients to look after. MyLodgeTax can help by taking care of registrations with tax authorities, calculating the right tax rates for each property, and automatically filing all lodging tax returns on time in all jurisdictions. If you’re a property manager and have questions about short-term rental lodging tax, drop us a line and we’ll get back to you with answers.