Airbnb should not be collecting state taxes - anywhere

[Brooks4]

I'm not sure how this Community Center works, but if it is primarily for owners and guests, this post will be a waste of time, and all owners, unless you have property in Vermont or Florida, can disregard.  Most every large company web site has a place to submit feedback to the company, and since there is no other place on the Airbnb site to submit feedback, if this does not go to the company, shame on Airbnb.

Recently Airbnb started collecting state taxes for Vermont and apparently one, or a few, other states, e.g. Florida.  It would seem as if Airbnb management has let their ill-advised tax lawyers hijack how the company should be run, in this case, incorrectly.  In most every state, certianly Vermont, the party who must pay room or rent taxes to the state is the party who solicits the customer, negotiates with the customer and ultimately secures the rental contract.  Airbnb is not that party.  Airbnb is an advertising agency for the owners who advertise on their site.  The owner is the one who convinvces the prospect to stay at their property, and then negotiates and secures the contract

Yes, in Vermont there are many rental agents, typically local, who advertise on their own, secure the guest on the owner's behalf, and negotiate the contract, collect all of the money and submit only a fee to the owner.  These agents do in fact pay state taxes to Vermont.  But Airbnb is in no way similar to these rental agents.  Again, Airbnb is a digital advertising and booking services agency.

Furthermore, no other of Airbnb's competitors, to my knowledge, take on the responsibiliy of paying state taxes.  Certianly the industry giant, Homeaway/VRBO, doesn't, and they control 90% of the vacation rental market.  Neither does TripAdvisor do it.  

But again, it would seem that either Airbnb's tax lawyers convinced manaagement that this was necessary, or, they somehow incorrectly allowed the State of Vermont to convince them they had to collect and pay the taxes on behalf of the owner.

Either way, we are where we are, but now that Airbnb has implemented this policy, on the owner's dashboard as currently configured, the owner has no way of seeing for each potential billing to a prospective guest how much in state taxes their guest is going to be charged.  So the owner sees one set of data summarizing what the  prospect would be billed, but then the guest receives something different, all of which makes communication with the guest as to total charges, perhaps not impossible, but frustratingly difficult to say the least.

I complained about this to an Airbnb CS rep and asked exactly what one current prospect was going to be charged in taxes and she said she couldn't tell me as that was the guest's private information, all of which is totally ridiculous, especially since in the end, the owner may be on the hook in the event Airbnb gets it wrong.  I think the CS rep was just ill-advised in this case, but if not, this is even worse.  Either way, it needs to be fixed.  Both parties should be seeing the same invoice.

The other cause for concern is tha my guess is that Airbnb is collecting the taxes incorrectly which could in the end result in the owner taking the hit.   in fact most rental agencies in Vermont do get it wrong as many of them incorrectly interpret the law re the required taxes to be only 10% of the rental charge, which is not true.   The law reads 10% of the sum of the rental charges plus the cleaning charge.  Then they get audited and have to pay back taxes.  So my strong guess is that Airbnb is also getting it wrong, in which case if they get audited, Airbnb may have to take the hit, but it is not at all clear that in the end, it will be the owner who would take the hit.  I can't tell if Airbnb is getting the Vermont tax collecting done correctly, as I have yet to have a transaction with Airbnb under their new tax payment system.

But man, this is a real mess.  Most owners who advertise on VRBO/Homeaway would love to see some more competition in the industry, but cases like this only leave the owners running for the hills.

[Dave-and-Deb0]

https://www.airbnb.com/help/feedback

[Andrea9]

@Brooks4

You have to thank your state for that. Any taxes collected by Airbnb are not their choice to do so, and I'm sure they and their tax lawyers would rather prefer not having to do this extra chore. Their acquiescence came after they started getting major flack by city and state administrations. Airbnb rentals were becoming far too popular and the powers that be were afraid to be missing out on taxes. Not every host is registered or declares their extra income, so this solution at least guarantees the city an/or state their dues.

It was a heated discussion in my city and after much pressure and negociation  Airbnb now automatically collects the hotel/tourist taxes.

[Brooks4]

Yes, I was assuming something like that had happened.  My take is that Airbnb nonetheless caved when they should not have.  Airbnb has been successful, but not nearly as successful (yet) as the vacation rental industry giant, Homeaway.  So either or both of two things  happened.  Either Airbnb should not have caved until Homeaway caved, and/or the State and the Towns who were concerned about lost revenue should have themselves have been focusing on the big target and not the small one.  

Legally neither the state nor the towns have any grounds for forcing Airbnb to do this.  And in fact the State of Vermont is very strong when it comes to nailing tax cheaters.  In our case, when we first bought our vacation home in Vermont 10 years ago, we had always planned to pay the state taxes, but before we even had a chance to make the payment, the State audited our lease transactions.  I think they may have picked us up by spotting our Schdule E on the Federal Return

It may be that Airbnb's typical customer, those who rent out a room or two on the side , are more likely than the vacation rental owners to report their income to either the Federal or State governments.  But what Vermont should have done is forced, if they legally could, which is doubtful, Airbnb to release to the State all of Airbnb's Vermont rental activity.  Then the State should have gone after the tax cheaters.  As it turned out, the State of Vermont got a great deal on this.  They got Airbnb to collect and pay the owners taxes, thereby negating the need for the State to audit these people.

In any event, as noted, we are where we are now.  Airbnb should not have caved, but since they have, they should fix their owners' dasboards so that both the owners and the guests can see exactly the same invoice that is going out.  The current display is nonsense.

[Susan151]

If you do a search, you will see that the State oF Vermont and AirBNB just signed a massive agreement about taxes. This agreement was initiated by the State of Vermont, so you should complain to your own state government. From AirBNB's point of view, they either had to accept this agreement or the State of Vermont was going to outlaw AirBNB.

http://www.sevendaysvt.com/vermont/vermont-regulators-zone-in-on-airbnbs-diy-innkeepers/Content?oid=...

http://digital.vpr.net/post/airbnb-will-collect-vermont-rooms-and-meals-tax-under-new-agreement#stre...

Looks like it is the  Vermont Tax Department which is managing the agreement. Perhaps you can confirm with them that the tax being collected has been correctly calculated?

[Brooks4]

Again, Vermont had no legal grounds for doing this and there is no way they could have prevented Airbnb from advertising for owners in Vermont.  However, now that I have thought more about this, what may have happened is that Vermont has agreed to pay Airbnb a fee for collecting these taxes, which if true, would have been a win for both parties.  If that's not what happened, shame on Airbnb.

And in fact if Homeaway, where at this point 99% of our income is coming, did the same, that would be a win for three parties - the states, the vacation rental advertiser, and the homeowner.  Paying those state taxes every month is a hassle for the homeowner. 

So I have no problem with Airbnb doing this, even though legally they didn't have to.  If everyone in the industry did it, that would be a boon to the homeowner.  But the problem that remains is how Airbnb has implemented this re the invoice display on the Homeowner's dashboard.  Both the homeowner and the guest should be looking at exactly the same invoice.  

[Dave-and-Deb0]

So what are you doing about it @Brooks4?  How is HomeAway collecting taxes or do you pay taxes with your HomeAway bookings?

[Brooks4]

I pay them monthly on the State of Vermont's online tax payment service - here

https://myvtax.vermont.gov/_/

which is helpful since we no longer need to do it by a monthly check, which was really a hassle.

But it would be best if owners didn't have to do the collection at all - as long as, in Airbnb's case, they would display what taxes they are billing in my behalf on my dashboard

As for Homeaway, again, they do not collect state taxes for any owner, anywhere.  I have had this discussion with their senior execs in the past as to why not provide this service, and their answer used to be that it was too complicated as every state has different rules and laws, etc.  Now, as a result of this dialogue, I am lobbying them again to rethink their position - i.e. get the states to pay them a fee to do it, and if they states where smart, they would take them up on it.  That way, everyone wins.

So what the online rental advertising agents should be doing is, in a way, doing what Airbnb is doing - i.e. at least begin knocking of these states, one state at a time, but make money while they are doing it, and in Airbnb's case, again get their act together on the owners' dashboards

[Carolyn80]

Brooks, I appreciate your effort to bring back a conventional mind-set about the way the rental business is conducted.  Unfortunately, it's dated and does not address the dynamic nature of technology in 2016.  Airbnb does far more than market your property.  Imagine all of the heavy lifting they do on your behalf to bring business to your door at little to no money.  Booking.com charges as much as 20% commission on the top-line of every reservation. 

I host in Stowe and Airbnb collects the 9% state tax and I price in the additional 1% the town requires.  The rent price, fees, and taxes are fluid and determined ultimately by the market.  On some Expedia schemes, for example, collects taxes on our behalf and deposits in my account the net of commissions.  There are multiple channels I use and happily play by their rules to compete and get the exposure we need to fill beds. 

The real concern should not focus on tax collection but the over 80% of illegal listings that are currently on Airbnb.  What the concern should be is that your rental does not meet the same standards of safety as other commercial establishements that are playing by the rules, only to be undercut by someone with a spare bedroom they want to rent. 

The future is that Airbnb will evolve into an OTA (online travel agent) like Expedia and Priceline as laws change. 

I have been in business for over 35 years and find that it's easier and more profitable to find the best way to swim with the current.    

[Brooks4]

Carolyn

Nice thoughts, but it looks like the only thing we agree on is one has to go with the flow

From your 30 years of experience, I think you also know that the only experience which counts today is the last 10 years, or more realistically, the last 3 or 4.  Airbnb may ultimately be a player in the vacation rental market, and yes, you have to play them just to cover the bases, but today, from my own experience and that of my tech savvy, as well as my not so tech savvy colleagues, they represent the Craigslist-level room renters, trying to break into the vacation rental business, and in both markets managing to fry all sorts of groups along the way.  In our home town, we just joined the crowd in a recent town meeting where Airbnb took up half the meeting, with lovers and haters going at each other - just like the last election.

Certainly in our case, where we have a very successful rental program for out condo, we get over 40 guests per year at solid rates 95%+ of which come from the industry giant, Homeaway/VRBO.  Homeaway/VRBO has pretty much destroyed the local rental offices in Stowe and elsewhere.  Many others have tried to take them on and failed, including last but not least, Tripadvisor, who has all kinds of resoruces to do it.

We got our first one from Airbnb just recently, which in fact was solid, and we booked it.  But then we got the 2nd inquiry for New Years - 6 guys.  Classic Airbnb.  So we quickly turned them down.  

That doesn't mean I love Homeaway/VRBO.  They have a monopoly position which they have recently abused vs the Homeowners, so it would be great if in fact Airbnb could give them a run for it, which in the end, they might.  But they are going to have to fix a lot before they do it. 

And the Airbnb and Vermont case is a perfect example.  It would be terrific if all rental advertising companies would collect all of our VT taxes for us, and if the Airbnb/VT deal somehow would result in Homeaway/VRBO following suit.   But as it stands now the Airbnb/VT deal has been improperly conceived and executed.  You obviously do know the market well, as you have picked up that VT only collects 9% of the taxes and not 10%.  I would wager that you are one of the very few that have picked that up.  While yes, from Vermont's standpoint 9% is far better than the near zero they would have otherwise gotten, how and why they let Airbnb, with all of its technology, not collect the appropriate town taxes as well, is a total mystery.   Here are some of the many problems with the deal and how it has been executed.

1.  VT obviously did not require Airbnb to collect for the towns that get the 1% taxes.

2. The towns, for the most part, seem unaware of this, but presumably at some point, they might revolt

3. The owners mostly don't know it either.  I don't know how you discovered it, but I kow I had to dig for it, because

4. Airbnb does not disclose, on the owners' dashboard,  what the owners' guests are actually getting billed by Airbnb.  They only display the funds the owner will receive.  I had to ask my two recent inquirers what the charge breakout was that Airbnb sent them, to finally learn they were ony getting charged 9%

5. While it would have been a great industry trend-setter if the VT-Airbnb deal had collected ALL the taxes, and later forced Homeaway/VRBO to do the same, as it stand now, the owners have been saved zero time-wise, as we still have to file the monthly tax reports to cover the 1% still due to the town

6. All the 1% towns are currently losing money on this deal. While you and I may be filing those 1% tax filings for our Airbnb revnues, most will not, as the owners generally have no clue, and the towns surely won't be auditing to check.  Back in October Airbnb just announced they would henceforth be collecting VT taxes, and then proceeded to go forth collecting only 9% and not disclosing it to the owners

There are other generic Airbnb problems when it comes to competing with Homeaway

1. Airbnb does not allow partial upfront payment with final payment later

2. Airbnb keeps all of the owner's money, no matter when the guest pays, until the guest arrives

3. Airbnb's owner dashboard is in the dark ages when compared to Homeaway/VRBO's owner dashboard

4. From the guests' standpoint, no doubt long time Airbnb customers have no problem with Airbnb's web interface, but for those who have been previously familiar with VRBO/Homeaway, they don't like it either

But yes, all of this is fixable, and may in fact get fixed.  One can but hope it does.  Airbnb has a lot of momentum and they may in fact eventually get it right.  In the meantime, I don't know what you are going to do, but I certainly plan to make sure the top senior officers in our town know what they are missing, as well as inquire with the State revenue people what in the world they were thinking in leaving out the town collection requirment.  And who knows.  Maybe there is, and has been from the beginning, a plan to get this right.  Somehow I doubt it, but maybe.

Meanwhile, yes, we agree.  Go with the flow

Brooks

[Brooks4]

Further on this Carolyn

I have now spoken with the VT official who negotiated the Airbnb deal.  He has confirmed what I had hoped - i.e. that Airbnb should be collecting the full 10%, not 9% for properties located in those towns, like Stowe, where those towns collect an additional 1%.  So what is currently happening is a glitch in Airbnb's system that  presumably will soon be fixed

In the meantime, he has further confirmed that for the purposes of hosts that are otherwise paying VT Rooms & Meals tax, Airbnb should be treated the same as the owner would treat reservations made through local town rental agents who collect the rent payments and pay the state Rooms & Meals tax directly - i.e. for those instances, the onwer has no responsibility for either the 9% tax or the additional 1% tax, in our case, for Stowe.  

Unfortunately all of us are still pretty much in the same position as before - i.e. unless or until Vermont strikes a deal with Homeaway, most all of us, as owners,  are still going to be required to pay considerable monthly taxes to the state.  I'm guessing that Homeaway will not cave in on this issue, as Homeaway, unlike Airbnb, does not hold back any payments made to the host.  All payments, deposits or otherwise, are immediately passed on to the owner.  So methinks that they legally have a strong argument that they are not a rental agent, but simply an advertising agent.  So after all of this ill-defined smoke we have had to plow through, we are, for the most part, stuck where we were before.