@Christine3190 No, you don't have to contact Airbnb to decline. But declines count against you, so the first thing you should do is tell the guest why you can't accept ( in this case because the person who is staying has to book under their own account) and ask them to withdraw the request. If they don't withdraw it before the 24 hr. window is up, you can either just decline it, or do as Flavia did, telling Airbnb it's a 3rd party booking.
And if it comes in the form of an Inquiry rather than a Request, you never have to decline- just messaging back is all that is required.