Make Sure you get the Credit for the Occupancy Tax Airbnb Collect from your Guests!

[Rachael26]

Tax deadlines approaching for 2017 - and in 2018 more and more local authorities are getting their act together and taxing short term rentals because of the explosion & popularity of Airbnb.

I learnt a few things last month by talking to my local City Finance Dept - and hopefully it might be of some use to others.

In North Carolina - like in many other US states - Airbnb collect from the guest and pay on behalf of the host the following - State Sales Tax 4.75% and in my Cherokee County - Sales tax 2.25% and Cherokee County Occupancy Tax 4%. 11% in total. And Airbnb collect this automatically from all my guests (which is great so I don't have to!).

So I went to the County Finance Dept and talked with a clerk. The tax office receives a large check every month from Airbnb. But they have no idea who it is for, nor do Airbnb submit individual records along with the monthly payment. Crazy!!

I am obliged to register, and submit monthly statements for, my rental property. Last year, 2017, each month I submitted a county form that shows how many bookings I had that month, the gross earnings income, the amount of NC tax Airbnb paid on my behalf, and the 4% occupancy figure which is part of the total tax collected by Airbnb. But with zero payments. I also include a page from the Airbnb Help website which says they are collecting the NC tax on our behalf.

So the County Finance Clerk knows that I have paid (via Airbnb) each month (there is a 5% fine if I don't file on time each month) but I know the State does not. And according to my local Finance dept - they have no clue who to attribute the payments for approx 80% of the monthly amount received from Airbnb (thousands$$) - they just bank the check!

So I can only imagine your local City or County office will be experiencing the same. So make sure you find out where you need to register and where to send your statements to, and do so. (Use the Gross Earning tab in the Earning Summary to print out a monthly record, this shows all the occupancy tax collected by Airbnb).

Eventually things will get sorted and the county/city tax offices will create a system that will recognise each host and the occupancy tax paid by Airbnb - but I also expect some backdated invoices and tax demands will be issued also, which will be an unwelcome surprise for some hosts - so be proactive, contact your local office and find out what forms they want from you - don't wait to be asked!

Happy Hosting!   :-))

[Mike-and-Marianne0]

Thanks Rachael,

I have a villa in Hilton Head, SC where airbnb does collect occupancy taxes.  Do you know where on the airbnb website I can find the amount of tax they have collected and remitted on my behalf?

Mike Sullivsn

[Caroline878]

Hi Rachel,

Do you send the transaction report to the State of NC too? I talked to a lady at NCDOR yesterday who was not at all helpful. I also figured out that AirBnB is charging my guests more than the combined tax amounts. I am working on getting that corrected now. 

Thanks for your post. It is the best information that I have gotten from anywhere! It is a very confusing process to say the least. 

Caroline

[Alicia242]

@Caroline878 @Rachael26  I am not looking forward to this and hope to hear back from you ladies on this topic. Massachusetts and Salem MA ( where my listing is ) just added this tax occupancy tax etc it gets worst for us as airbnb is not yet set up to collect the funds for us :o! Can you say nightmare and major inconvenience for we hosts??!  The tax and occupancy tax starts in April 2019 for the city and July2019 for the state. Any tips also. I am not paying tax or adding the tax for the guests that airbnb charges the guest already an extra 12-13% on top of what I charge the guest so I need to figure out also how to do this. WE have a local town annual airbnb meeting this Thurs and would like to share some info with everyone there. Thanks in advance for your time and assistance

Alicia 

[John47]

There's another thread here about STR tax in MA that I've posted a few things in, and don't have the link handy but sure you can find it. ("New Airbnb taxes in MA")
Part of the problem is that the tax applies to cleaning fees and other charges so it appears that it apply to the booking fee that guest pays as well, and even potentially the credit card fee (which i see as a catch-22 as how to you pay tax on the fee charged to pay the tax?).
I have written Patrick in Sen Cyr's office but not gotten any response yet.
Even the Mass DOR is still unsure of how to implement this, it seems.

[John47]

Posting following here also (composed in WordPad so looks a bit odd):

I've since rethought my approach to this issue, at least as it relates to service fee. And the service fee is not really being charged by Airbnb, but passed through to us from credit card processor.

However, it still has the potential to be negative to a host in terms of income though by a small amount.

Let me show via an example as I BELIEVE it would work, and using a booking fee of 12% which may or may not be accurate but close enough.
Using a base rent of $1200 and a cleaning fee of $50, the basis for booking fee is $1250. So at 12%, that would be a $150 fee.
Thus the guest would be charged $1250+$150 or $1400 without the new tax. Since hosts get 97% of that after 3% service fee,
in this case, that would net $1358 to host, right? As $1400 x 3% = $42 taken off the guests payment.

The problem that i see is that when taxes are added, Airbnb MUST remit the computed amount of tax, not the net 97% that they get from VISA/MC.
So - we take the $1400 and add what my town rate would be (5.7% MA + 4% local + 2.75% Cape wastewater) or 12.45%.
That's $174.30 in tax so now guest must pay $1574.30. However, Airbnb will get charged 3% on that or $47.23 by credit card companies.
Thus they will end up with $1527.07 to work with. And they HAVE to give the $174.30 to MA DOR which means that there's now only $1352.77 left to pass onto us as a host!

Comparing the payout to host without tax of $1358 to the post tax amt of $1352.77, the host gets $5.23 LESS than before, it would seem!
The guest is therefore paying the tax on the credit card fee, and the booking fee but we as host, get a bit less income!
I really don't see any other way that it could work due to how the process and laws work.
And it would be probably impossible to raise rate just enough to net similar amount to before as unable to charge less than $1 increments,
plus it would look weird to instead of a daily rate of $120 (for 10 days in example above), have a daily rate of maybe $120.55, right?

The above is just my current view on how I suspect the taxing in MA might work and not anything official, ok?