Airbnb Hosts Meet the Taxman
- Sales Tax News
- Sep 25, 2014 | Gail Cole
Since the inception of rooms, renting out a room has been a great way to earn extra cash. In today’s world the process is easier than ever thanks to websites like Airbnb.com, which help connect people with rooms to rent with people in search of a place to stay. The result is that even though in many areas it isn’t legal to rent out homes and rooms on a short term basis, more and more people are doing it.
Enter the taxman.
The Los Angeles City Council has approved a budget recommendation to “instruct the City Attorney, with assistance from the City Administrative Officer, the Chief Legislative Analyst and the Office of Finance to report to the Budget and Finance Committee on the application of Transient Occupancy Tax on rooms rented by Airbnb and other entities that compete with the hotel industry.”
In other words, if you live in Los Angeles and rent out rooms through Airbnb.com or a similar site, you may soon receive a warning to pay taxes on the room rentals through the website you use. Most sites “allow users to contact hosts before booking rooms.” This is how Los Angeles city officials intend to contact renters to inform them that they have to collect and remit taxes.
For some time, the city has had a policy of emailing “tax reporting reminders to people who list their homes for 30 days or less on Airbnb, VRBO and other sites.” Now, however, the Los Angeles Office of Finance must “draft warnings to residents anyway, warning them to start collecting taxes on short-term rentals”. (Los Angeles Register). There is a subtle distinction between a reminder and a warning.
Airbnb spokesman Nick Papas says that Airbnb already encourages hosts to comply with local tax laws. Under current LA law, the city cannot require businesses such as Airbnb to collect hotel taxes. However, the property owners are “legally required to do so.” LA Councilman Paul Krekorian would like businesses such as Airbnb to help the city collect the taxes for them--like the company will soon do in San Francisco.
Beginning October 1, 2014, “Airbnb will collect San Francisco’s 14% hotel tax from visitors who book apartments or rooms in the city.” San Francisco expects to add more than $11 million to its coffers as a result of this new policy.
Like in Los Angeles, short term rentals are illegal in San Francisco. However, the reality is that they’re also a growing business. Hence the taxman.
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