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This post is brought to you by Avalara MyLodgeTax and follow-up from their February 22 webinar.
There is a lot of confusion about what to do and there are many potential concerns that vacation rental property owners may have when it comes to lodging taxes. Here are the most common lodging tax concerns for property owners. In no particular order…
1. Collecting and remitting any lodging taxes
In nearly every state, short-term renting a home requires an owner or manager to collect lodging taxes on the rent charged to the guest. These are usually the same taxes a hotel charges. Short-term renting in most states is considered less than 30 days, so if you are renting by the week or weekend, it is important to remember to collect and remit these taxes.
2. Charging the wrong tax rate and confusion on fees
Determining the correct tax rate to charge can also be a significant challenge.
Your property may be governed by three different tax authorities – city, county, and state. You need to know the correct tax to charge from each level of government. You should contact each agency and it is often the case that tax agents you speak to at the state don’t know or think to mention the city tax – and vice-versa. Tax rates can also change.
Being thorough and diligent and checking with the various agencies are important steps to determine the correct rate.
3. Collecting tax from guests and knowing where, how, and when to pay it
One of the major challenges for tax compliance is knowing where and when to file and pay these taxes. The average property is required to report these taxes to two different agencies, on a monthly or quarterly basis.
For example, in Florida, a short-term rental needs to pay state sales tax and then each county has its own tourist tax that is usually paid directly to the county.
These ongoing, rigorous and varied rules with different tax agencies create challenging requirements. Unlike income taxes, these taxes are typically due monthly and quarterly to some combination of city, county and state tax agencies.
4. Assuming the tax is paid at year end or paid with income taxes
Unlike income taxes, which are filed with the IRS (federal government) and maybe the state where you live, lodging taxes are very different.
For income tax, you only owe tax to the extent revenue exceeds your expenses. But sales and lodging taxes are a tax on the total amount of rent that you collected. While the renter originally owes these taxes, the property owner is responsible for collecting, filing and remitting lodging tax returns and payments.
Sales & lodging taxes are due to city, county & state agencies on different forms with monthly and quarterly filing requirements.
What can you do to address these common concerns?
As you might have noticed, lodging taxes can be a complex topic. The first step is to reach out and explore your local city, county and state government websites. They are a good starting point to research the various taxes and often have all the information you need. But you may need to call the various agencies to clarify and get specific requirements for your rental location.
If you want help with these requirements and put your lodging taxes on auto-pilot, for over ten years, MyLodgeTax has offered simple and affordable solutions for owners and property managers to handle all of these lodging tax requirements for you.
- Follow us on the Avalara MyLodgeTax Facebook page or find more information on our website.
- To help you take the first step, we have a handy lodging tax rate lookup tool.
This content was created by Avalara MyLodgeTax for educational purposes only. It is intended to provide general information and a general understanding of the law, not to provide specific legal or tax advice and should not be used as a substitute for competent legal or tax advice from a licensed professional. The views and opinions expressed here are not necessarily those of HomeAway or its affiliates.