Hotel/PST taxes in BC - Canada?

[Dave264]

Hi there - just setting up my airbnb here and a little confused about the collection of taxes.  I know many people are collecting and are required in the US, but up here?  There is talk that airbnb will start collecting for us, but why?  According to this: https://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/pst-120-accommodation.pdf less than 4 units is tax exempt.  Am I missing something?

If that is the case, IS there a tax I should be collecting for BC?  Not clear where to find out if your community collects the MRDT.

[Claire476]

Hi Matthew,

Thanks for your work with Airbnb on this. 

On additional question that I wonder if they answered as part of your correspondence: 

Exactly WHEN will they start collecting taxes? Will they wait until Oct 1? That is what I've been assuming, but perhaps that assumption is incorrect? Perhaps they'll start collecting it now (or already have been) for bookings made for post-Oct 1 stays. 

Or maybe wishful thinking on my part. 

[Lynne88]

Here's an official response from Ministry of Finance addressing "transition"

__________________

CTBTaxQuestions@gov.bc.ca

Thank you for your reply and follow-up inquiry.

Our understanding is that you are concerned with accommodation booked prior to October 1, 2018, but not provided until after that date. Otherwise, there is no change in the application of the PST.

Information on the “transitional rules” relating to accommodation, as of October 1, 2018, are found on page 3 of Notice 2018-004, Notice to Accommodation Providers, with examples.

The date a “confirmation” for the booking for accommodation is issued (including the acceptance of a deposit) does not determine whether the old (current) or new rules apply. Please note, however, that deposits are not subject to PST. The PST becomes payable when a deposit is applied against the purchase of a room.

If the guest has already booked a stay (before October 1, 2018) for some time after the date when the new rules come into effect, in almost all cases the new rules will apply – that is, they will need to pay the 8% PST (plus the up to 3% MRDT, if applicable).

For the most part, the current rules (i.e., no requirement to collect PST if offering three or fewer units of accommodation) would apply only if the room was paid in full before October 1, 2018. This would include a case where the accommodation provider has a “no-cancellation” policy, or a policy that the purchase price will be charged unless the cancellation occurs before a particular date (this is considered to constitute a purchase of accommodation, even though it is not actually used), and the purchase price for the accommodation is charged under those policies prior to October 1, 2018.

This correspondence describes how the Ministry interprets the relevant tax provisions for information purposes only. This response may be impacted by variations in circumstance, subsequent changes to legislation or subsequent court decisions. The Ministry is not responsible for updating this response if there are any subsequent changes to the law. This response is provided as an aid to understanding the legislation and is not intended to replace the legislation.

Rulings and Interpretations Team
Ministry of Finance
www.gov.bc.ca/consumertaxes

[Dave264]

lol...what a gong show they are making this - one reply says ask the other guy, one reply says pre-oct 1 book no worries, another says pre-oct 1 book must pay for post oct stay...but maybe not!  Good luck getting us all on board here!

So question being, the first reply Matthew received seems to imply since Airbnb collects the money in advance, that counts as the 'scenario' your guy mentioned where room is paid in full...in which case all, good...or is it?  We don't receive the money until 1/2 way through their stay (or end of stay) - is that the transaction that matters?  I assume it will be if Airbnb won't be collecting the tax for us, but if Airbnb is collecting, no tax will be required for the Pre oct booking.

So if Airbnb drops the ball and its all on us, I think how I read that, we are screwed - we either need to eat that PST/MRDT ourselves, or push the guest to pay for it when it wasn't previously disclosed in our ad, risking likely bad reviews (FYI, I did add to my listing that this is coming Oct 1, just unsure how it will be dealt with - I'd recommend having that note in there so at least you don't have disclosure issues with future bookings)

Thanks BC Government!

I did take the intitiative to send an email to Carole James directly since she is the one that claimed Airbnb is taking the reigns on this.  No reply yet, will post if I get something.

Government is heading for management nightmare here - media hasn't touched this bit of info yet so I bet 95% of Airbnb'ers are totally out of the loop and will be not complying and having a tax bill unknowingly racking up on them!

[Barb72]

Thanks Dave, following!

We have one vacation rental with bookings after Oct 1st (including next summer) through airbnb and the other big one, who is not yet on board with collecting pst and mrdt.  Half is paid at the time of booking and the other half 30 days prior to stay.

Our municipality collects 2%, not 3.  Does that mean airbnb will collect an additional 10%?Must be. 

Do you think that means an additional 11% will be charged on the second payment only?  It seems common sense that any new charges after Oct 1st will have the additional taxes added but I'm not that hopeful the BC gov't will use common sense or do what's fair.

If it's left up to the vacation owner to remit pst/mrdt on current bookings, we will probably just pay ourselves. 

That's an excellent suggestion to add a note that there will be an additonal provincial government tax starting Oct 1st.  

[Dave264]

Million $ question whether or not they are collecting this.  They collect all these and lump together in the US - not clear how much variation it is state to state.  I know in VIctoria it is a nightmare and I think it varies between 2 and 3% so how the heck will that get managed?

Certainly no idea here how they would treat it if you have 1/2 payment paid already (mine is setup where I seem to get 1/2 pay a few days in, remaining on checkout, or if just a couple nights, all on checkout.

I have a bad feeling Airbnb is not taking care of this so I am upping my game - have a contact at Global news and will see if he is interested in tackling it!

[Dave264]

Just a note while we all try to figure out what we are actually supposed to do, I have been in contact with Global News in Vancouver about this issue - the wishy washy we are getting from both Airbnb and our government he agrees is a story worth discussing, but not without an interview from someone this affects significantly (thinking solid post Oct bookings a prime example).  Anyone interested in taking that on?  If we get media and awareness going, maybe they will actually ramp up effort to try to tell us something accurate and we would be doing a service to all the other hosts out there totally unaware that they will not be complying and racking up tax bills if government cracks down.  Drop a reply if so and I will get you in touch with him.

[Dave264]

well, fwiw for those following along, I received another more useful reply from our government - they 'believe' Airbnb has agreed to register and collect the tax, but they are unable to confirm if they infact did register with them!  Given I see Hawaii now suing Airbnb because they never got around to collecting taxes and they want all the names of hosts that are not complying, I am betting Airbnb is overwhelmed and has no plan to take care of this in time.  I did send one last ditch yes or no to Airbnb and waiting to get a reply, but my gut says we are on our own and better take care of it ourselves.  The sucky thing is I know this will put us at a disadvantage with similar properties not collecting, but I have a feeling tax man will eventually get them and I don't want to be in the middle of any gong show where we have to come up with uncollected taxes on 5 years of booking!  You know the government will come looking for their money eventually and from reading other cases, with penalty.

[Barb72]

We agree Dave, it’s ultimately our responsibility to register and collect the taxes as required by the federal, provincial or municipal government. We’ve decided to “eat” the taxes payable on current bookings for after Oct 1 but as our Sept is booked we will now change our rates to add the additional taxes with a note that if Airbnb also charges guests we’ll refund the duplicate tax.

This will probably put us at a disadvantage when compared to our competition but we at least won’t be on the hook for the extra tax. 

[Dave264]

ok, I've been back and forth with media types and they did find some answers we are looking for.  It sounds like Airbnb hopes to be collecting by end of year!  Better late than never I guess, but in meantime, I sent that back into governments court to point out the logistics of all of us taking out business numbers just to collect for 3 months and how ridiculous that would be for administration/paperwork etc so 'how about you just delay until Airbnb can sort out'...huh huh?  Curious their response, and also if I get anything further from Airbnb, but looks like at the least, we are going to have to pick up some slack until end of year.

[Dave264]

well geez, this just keeps getting better - now I get a reply from Airbnb saying an email will go out to hosts on Sept 17 saying that they will be collecting for us for Oct 1!  Lets see if this answer holds true & that email comes!  It's crazy to me that there have been so many different responses but I wonder maybe if our government reached out again and put some pressure on them.  Fingers crossed 🙂

[Daniela888]

Hi Dave,

I guess I should have taken the time to read through all the replies!!!

Fingers crossed that Airbnb will register for sure that’s the best outcome all round.  Let’s push for a GST option too!!!  Hold on to that email, we may need it.

Thank you for all your hard work, it is very much appreciated.

Daniela

[Dave264]

ha, no problem - email comes Monday so I'm hopeful.  In meantime, I have had a few new booking and I am telling them in message upfront I will need to collect the 10% as extra payment, they are ok with that so far.  Technically thou, we need to take out a BN for the tax collected  til Oct 1 which is a pain for sure.  Would be great as you recommend, especially with GST as well.  No issue for me yet, but could be soon.  I really don't think we can bake that into our daily rate thou as then in their eyes, we would be under-reporting revenue.  I have to figure it they ever wanted to audit, the revenue number provided by Airbnb will be the total revenue they expect to see and then tax collected on top of that number.

[Peter1254]

GST is a real issue here. I have to collect  GST, so I've included it in my rates - but AirBNB have no way to know that, so they are now going to collect PST and MRDT on the GST. Crazy. Other platforms allow you to specify tax rates on top of the basic rental.

[Dave264]

Hey Peter - yeah, not too interested in trying to tackle GST so plan on capping out bookings under $30k to avoid that nightmare.  I had talked to my accountant about this though and he clarified that we cannot take out the GST amount from our booking amount as then we are claiming less 'income' than we actually made.  I assume if we were ever audited, rev can would base income on the number showing in 'progress'.  If you are stating $150/night gst included, that means you are only actually claiming $142.85 as income, but when you are audited, they will base it on $150 and you will end up owing more.  

Unfortunately, while you are probably in the majority in terms of 'how' you are collecting, it is the incorrect way and technically we are supposed to ask for GST over your actual /night amount as an 'additional payment' or a cash payment on arrival (that would also eliminate the problem you are having).  In example above, you should actually be collecting $7.50 for the night, not the hidden $7.14 you would be claiming.

Just keep that in mind, or if there is anyway to get back under $30k, it may be worth it to avoid the ongoing headaches.  Certainly would be nice if Airbnb adds an optional tax entry to differentiate those that need to collect, but thats another battle they likely aren't ready to fight yet - sounds like for now, they are going to work at putting pressure on VRBO and homeaway to collect PST/MRDT as well so they aren't at the disadvantage.  Obviously incentive for goverment to see this as well since 95% of those users are likely now fraudulently not collecting their necessary tax.

Such a sticky topic!

[Daniela888]

Good morning everyone,

Here’s how I understand it...

After sifting through several different articles, the Bulletin and updates:

All accommodation providers are required to collect and remit PST and MRDT in BC (unless your booking platform does it for you).  The four unit exemption has been ‘eliminated’.  Though there is an exemption for those earning less than $2500 or for leases of more than 30 days in length.  This is separate from the current GST exemption of  less than $30,000.

In short: You will be required to collect and remit PST, MRDT.

https://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/notice-2018-004-pst-mrdt-accommodat...

As Airbnb are registered outside of BC they are not required to collect and remit on our behalf;  they “may” do so.  After speaking to Airbnb, the rep said that “if we are required to collect and remit the taxes then we will”.  They are not required to.

I have requested that Airbnb add an option for taxes on the listing page (as they have with the occupancy taxes in Quebec, Ontario).  I have had no response.  If we all push for this, then hopefully they may listen.

The only other options:

- we adjust our prices to accommodate the 10% increase - which is difficult (10% of the totals you can’t know until after the booking is made);

- ‘Suck it up’ and remit the 10% ourselves;

- request an additional payment from the guest through the resolution centre.

All terrible options for us when Airbnb could simply add the option.