Sales Tax

[Charlotte11]

Longshot, but can I compare notes with you guys? Here's the thing:

In Virginia, AirBnB refuses to follow VA law to provide host data along with the remittance of bulk sales tax revenue to localities. (All other platforms have no problem with that.) So, hosts are required to submit a monthly report to the local government that lists the rental income last month and how much tax should be remitted on our behalf.

In order to figure that out, I long ago developed a spreadsheet template to help. Pull up last month's transactions on AirBnB and export to csv, then plug in the numbers to the template. In Dec 2022, I discovered that AirBnB started charging sales tax on the fee guests pay them. OK, no problem, probably gearing up for the Oct 2023 transition from hosts remitting the taxes to AirBnB remitting them.

On July 1 2024, our local transient occupancy rate rose from 8% to 9%. So I edit the template accordingly. Then I realized the total sales tax didn't match what AirBnB listed on the Transaction History. Went line by line for my 3 bookings in July and found that the rate AirBnB charged on guest fees wasn't consistent. One was correct - the total of local and state tax = 14.3%. One factored out at 6.23% (??) and the last at 6.2% (??).

I called AirBnB on Sep 6 and they said it would be researched and they'd get back to me. I've received 3 "still working on your issue" messages and still have no answer. So I'm reaching out to you people! Does anyone else track this line by line or do you just report what AirBnB lists in the Transaction History? They reported (and presumably paid) $464.03 in collected taxes for July and, by my calculations, it should have been $491.21.

Thanks for any feedback!

[Rebecca]

Hi there @Charlotte11 👋

Are you part of one of the Local Host Clubs?  It might be worth popping there for more area specific regulations and licences, cleaners and things like that. Please let me know how you get on. 
 
Rebecca 🌟

[Charlotte11]

Thanks @Rebecca , I'll give the only Virginia community listed a try. I'd like to keep this question open for the moment on the off-chance someone sees it and has some feedback.

Cheers,
Charlotte

[Charlotte11]

UPDATE: AirBnB sent a message that the issue was resolved with this reply:
"I have investigated in relate to your concern and here is what I have found that the taxes and the service fees gets charged based on your nights which are booked and also as per your nightly rate directly by the system. "

And then closed the case. Sigh.

I replied that yes, indeed, I do still need help as my question was not answered. At all.

Cross your fingers for me!

[Joan2709]

@Charlotte11 

Yes…I am working with other Hosts where Airbnb is collecting all taxes and they are doing it incorrectly. Unfortunately, if the taxes are underpaid, the Host is still responsible for paying the tax.

Sales tax and lodging tax is only supposed to be charged on the nightly rate, cleaning fee and any addl host fee. Airbnb should NOT be charging taxes on their Guest Service Fee (in the USA).

You’ll have to work with Airbnb to get the discrepancies resolved…be prepared for an uphill battle on that one. Meanwhile, continue to report as required and if the taxes are underpaid, you’ll have to make up the difference and pay it to the taxing jurisdiction out of pocket. If they are overpaid, there is not much you can do about that, as Airbnb is collecting and remitting the overpayment to the taxing authority...you never see those funds. A guest could probably challenge the amount of overpayment, but they would have to contact Airbnb themselves to address that.

I’m a bit confused about whether Airbnb has an agreement to pay taxes in Virginia. Per the website, it says they do. They pay in a lump sum to each jurisdiction, not by individual Host listing.

You can check what tax jurisdiction Airbnb is paying (but not the percentage) by going to:

Listing Editor

Preferences (top right)

Taxes

An example of how taxes are paid on a reservation. Airbnb lumps both sales tax and hotel/occupancy taxes under the heading "occupancy tax." 

Rules

Occupancy tax collection and remittance by Airbnb in Virginia

State of Virginia

https://www.airbnb.com/help/article/2335

Guests who book Airbnb listings that are located in the State of Virginia will pay the following taxes as part of their reservation:

• Sales Tax: 5.30 - 7.00% of the listing price including any cleaning and guest fees for reservations 89 nights and shorter. For detailed information, please visit the Virginia Sales Tax website.

• Local Lodging Taxes: All locally imposed transient lodging taxes will be collected on reservations in Virginia. It is typically a percentage of the listing price including any cleaning fees and guest fees. The tax rates and exemptions vary by city and county. For detailed information, please visit your local finance department web

[Charlotte11]

Thanks very much for the reply, @Joan2709 . In the case of Virginia, starting in October 2023, AirBnB remits all local and state sales taxes on behalf of hosts. As I mentioned, Virginia passed a law to require all host platforms to provide host and address information along with the remittance of these taxes. They refuse to do so. Apparently it's going to take some localities banding together to sue AirBnb in order to make this happen.

In the meantime, hosts are required in my locality of Charlottesville to send in a monthly report listing the total rental income as well as total taxes as well as a copy of the AirBnb transaction history.

In this case, I am not responsible for the discrepancy because the problem only seems to be related to the guest fee taxes. The state is going to be interested in the fact AirBnb is lowballing sales tax on their income as is the City, who is due 9% in local taxes.

Just trying to see if anyone else has noticed this anomaly. It appears that most hosts don't drill down to this level of detail, unfortunately.

[Joan2709]

@Charlotte11 

Airbnb should NOT be charging taxes on their Guest Service Fee (14.2%) in the USA (as far as I know). This is because as a Host, you don't see any of the Airbnb Guest Service Fee; it is paid directly to Airbnb and not part of your Host payout. Of course, if your local laws state that the taxes must be applied to nightly rate, cleaning fee (other fees the Host charges) AND the Airbnb guest service fee, that is a different story for sure.

I only work with Hosts in the U.S. and so far, the Airbnb guest service fee is never included in tax calculation? Airbnb does charge VAT on the their Guest Service where required outside the US (like EU countries). 

Thanks for bringing this up as I bet many Hosts in your state are not even aware this is happening...the Airbnb Help article still says they are collecting all taxes in Virginia, so Hosts may not even be aware.

[Charlotte11]

Interesting, @Joan2709 . My assumption, though, was that Airbnb would have to pay sales taxes on income gained in VA localities and the state. This doesn't really have anything to do with the hosts but rather their own liability. Right? Seems reasonable to me that they can't avoid paying sales tax on that income... I wonder how it worked before they began to remit taxes on hosts' behalf...

I so hope a host in another area of Virginia pipes up here with details about their transactions starting, say, Jan 1, 2024. Add up what the sales taxes should be for their bookings and then add up the Occupancy Tax figures in each transaction history and see if they match. I would expect that the latter total will be higher then the former.

[Joan2709]

@Charlotte11 

I would imagine they would pay taxes on the income generated from the Airbnb Guest Service Fee and the Host Fee (3%), but that is something they would handle separately from the taxes a guest pays (sales & occupancy taxes) and the taxes you are responsible for paying as a Host.

[Charlotte11]

Sorry, Joan, I must have misspoken. AirBnB refers to sales tax as "occupancy" taxes and that's how it's listed on our Transaction History. So, along with our sales taxes they collected, they are also remitting the sales tax they are directly responsible for when they charge a guest fee. I didn't mean to refer to income tax. It's clearly sales taxes and they've been doing it every month now for almost two years. I have spreadsheets listing every transaction so I can definitely see how these add up and they always have added up until this.

Here are two examples from July to make the point.

Guest #HMN53JRWNB July 26, 2024
taxes factored correctly:

Rental $630
City tax 9% = $56.70
State tax 5.3% = $33.39

Guest fee $88.94
City + State tax charged 14.3% = $12.71

Total taxes $102.81
AirBnB collected: $102.81
***************
Guest #HMD5B5M2ZB July 17, 2024
Should have been:

Rental $1160
City tax 9% = $104.40
State tax 5.3% = $61.48

Guest fee $163.77
City + State tax charged 14.3% = $23.42

Total taxes should be $189.30***

But AirBnB charged:

Rental $1160
City tax 9% = $104.40
State tax 5.3% = $61.48

Guest fee $163.77
City + State tax charged 6.2% = $10.15

AirBnB collected $176.03***
***************

Thanks so much for sticking with me, by the way! I'm a little OCD about spreadsheets!

[Joan2709]

@Charlotte11 

No worries...I always advise Hosts to keep their own spreadsheets and track every reservation and break down all the taxes. You are right, Airbnb lumps all taxes (sales tax and any occupancy taxes) under the heading "Occupancy Taxes." I wish they would separate it out as separate line items for better transparency as Sales Tax and Occupancy Tax. 

The Airbnb Guest Service and the Host Service fee they charge would be a separate issue and probably considered as corporate income on Airbnb's taxes. I'm not an accountant and not qualified to answer that though. 😊

I found another thread from a VA Host that was wondering the same things you are:

https://community.withairbnb.com/t5/Help-with-your-business/Why-is-the-Airbnb-service-fee-being-taxe...

Perhaps you can reach out to them and see what they found out?

They reference the Airbnb Help Article which states the Guest Service Fee is not taxed:

https://www.airbnb.com/help/article/2523#section-heading-3-1

[Charlotte11]

Ooh, that's very interesting, @Joan2709 . I hadn't noticed that before so this gives me yet another question for Support. I sort of get it that AirBnB would have to pay the state sales taxes on rental charges but if their own guidelines state they don't do this... Sheesh!

OK, back to hounding Support! Thanks so much.

Charlotte

[Joan2709]

@Charlotte11 

Remember that Airbnb says the Guest Service Fee is not taxed to the guest...it doesn't say they don't pay sales tax as a corporation on the amount of each reservation. Not sure what they are responsible for paying. The Host is only responsible for ensuring that all sales tax and occupancy tax is collected on the nightly rate + cleaning fee. If Airbnb doesn't collect and pay those correctly to the State, then the Host is still responsible for paying any discrepancy if underpaid.

I also found these 2 articles in the Airbnb News Room and the State of Virginia Tax Site:

https://news.airbnb.com/supporting-virginias-new-tax-collection-and-remittance-law/

https://www.tax.virginia.gov/sites/default/files/inline-files/airbnb-vataxworkgroup-submission.pdf

Let us know how it goes as it could really help other Hosts in Virginia.

[Charlotte11]

Joan, you ARE good! Unfortunately, the first link doesn't mention that they are not going to comply with the part of the law that requires host names and addresses.

I remember the second, a PDF. That was when AirBnB was fighting hard against the law to remit the taxes. It was a bit funny that they talked about how hard it was going to be to comply since every locality manages tax reporting differently... when they have thousands (millions?!) of localities around the world with different requirements!

That said, I'm happy to report that Support is supposed to call me shortly. Can't wait to see what happens next!

[Joan2709]

@Charlotte11 

Ahaa...the plot thickens! I remember another thread where the Host in another State that attempted the same thing as Virginia (wanting Airbnb to disclose names and listings and amounts). I believe it was Florida. The local jurisdiction sued Airbnb and it went all the way to the state supreme court and the jurisdiction lost. I'll see if I can find the thread. 

I believe this is going to become an on-going issue for Airbnb as more and more jurisdictions crack down on those Hosts either not paying the occupancy and sales tax and/or jurisdictions that want more accountability from Airbnb. In Airbnb's defense, just think of the mind boggling abount of data that would have to be collected and reported to each individual taxing authority...Yikes! 😱

Some jurisdictions have hired 3party companies to do this for them. They do this by requiring licensing and registration of all Short Term Rentals in their jurisdiction. The Host then reports the amounts collected (usually monthly or quarterly) to the jurisdiction and indicates on the excise tax form that Airbnb (or Vrbo etc.) are collecting and paying the taxes and -0- is due. The jurisdiction then audits the amounts they received from Airbnb to see if it is accurate.