Chicago’s new shared housing surcharge, July 2016
- Sales Tax News
- Jul 6, 2016 | Gail Cole
Beginning July 1, 2016, the rental or leasing of any vacation rental or shared housing unit in the City of Chicago is subject to a surcharge of 4% of the gross rental or leasing charge. The surcharge is in addition to the existing 4.5% Chicago Hotel Accommodations Tax, for a combined city tax rate of 8.5%. State taxes, which are administered by the Illinois Department of Revenue, also apply (learn more about state taxes).
The city defines “shared housing” as “a dwelling unit containing 6 or fewer sleeping rooms that is rented, or any portion therein is rented, for transient occupancy by guests.” “Vacation rental” is defined as “a dwelling unit that contains 6 or fewer sleeping rooms that are available for rent or for hire for transient occupancy by guests.”
According to the Chicago Department of Taxation and Finance, the duty to collect and remit the surcharge falls jointly on “every owner, manager or operator of every vacation rental and shared housing unit,… including “persons engaged in the business of facilitating the rental or lease of hotel accommodations for a consideration, whether on-line, in person or otherwise.” The owner doesn’t have to collect and remit the tax if the facilitator collects and remits it; however, the owner is liable for the tax if the facilitator doesn’t.
Translation: Airbnb is welcome to collect the surcharge on its shared housing rentals in Chicago, but it isn’t obligated to do so. If it doesn’t, the owner must. Airbnb already collects the 4.5% Chicago hotel tax and applicable Illinois state lodging taxes.
Not subject to the surcharge
The surcharge does not apply to the following:
- The rental or lease of a domicile or permanent residence
- Temporary accommodations in nonprofit medical institutions, hospitals, or accredited medical education institutions
- Rooms rented by a bed-and-breakfast
- Charges added to the charge or fee on account of any taxes, surcharges, or fees
- Separately stated optional charges (such as fees for laundry service or room service)
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