Sales Tax on Non-refundable Cancellations

[Donald220]

I am receiving what I believe to be incorrect information from Airbnb support. A guest recently cancelled a non-refundable reservation. Airbnb has refunded state and local taxes to the guest even though they paid over $1200 in cancellation fees. 

The rental is located in Maryland and everything I can find online indicates sales and lodging taxes are still required on any retained cancellation fees. 

Has anyone else experienced this or does anyone have any suggestions?  I have attempted to resolve via Airbnb support but they keep sending me links that are not relevant and have shut down further support on this issue. They are only offering the useless “feedback” link. 

Help!

[Joan2709]

@Donald220 

Thanks for posting this, as I never thought about this scenario. Are you required to pay local taxes that Airbnb is not collecting? Also, if Airbnb is paying the state taxes for you, wouldn't they still need to pay the tax on the amount you still collected from the guest even though the reservation was cancelled?

You may have to call your local/state taxing authorities to clarify this and what their policy is. Essentially you still received income from this reservation and I'm thinking you probably still have to pay taxes on it. 🤔 It will be very difficult to get Airbnb to adjust this now, as the guest has already received the refunded taxes on the cancelled reservation. 

[Donald220]

Yes, that is my concern. State and local taxes are due on the amount paid but Airbnb has improperly refunded what they collected to guest. Worse, it seems no one cares to actually look into the matter. They just say they work with tax authorities and provide me a link to the standard refund options which don’t include any option to not refund taxes. 

[Victoria1437]

I have just experienced this scenario for the first time in 13 years. The guest cancelled, Airbnb refunded the cleaning fee (which okay I get that) and the remainder of nightly rate they did not pay out the taxes that I have them collect! They are stating that because the guest did not check in and stay, that state and local authorities will not want their taxes. I don't think so. I am contacting Hawaii authorities tomorrow to justify the position (hope I am wrong) and if I provide proof that I have to still pay the applicable 17.92% tax on the payout that Airbnb will rectify their error.

[Donald220]

Please let us know how Hawaii responds. I would be very surprised if they don’t want tax on the payout.