Transient Occupancy Tax

[Adrienne59]

My city, Chico California, has recently implemented the Transient Occupancy Tax (TOT) and has declined to open an account with Airbnb for the collection of this tax.  This puts hosts in the awkward situation of eating the 10% loss, or attempting to collect the tax in what I deem is unethical, unprofessional, and rude, fashion.  Chico has also demanded that we pay the TOT for one year retroacitive.  We are currently working to inform our city council members on this issue--to both get the retroactive TOT rescinded, and to force the city's hand in opening an account with Airbnb.  We need Airbnb's help on this and even though I've called for help over and over as well as written message after message, no one can answer my questions. 

Here is my first question: How does the city start the process of this TOT collection process?  Who do they contact and how?  How much does Airbnb charge for this service?  Is it free?  Is it a flat rate?  It is based on a percentage of the taxes collected?  

Why is it so difficult to get answers to these questions.  Some of the Airbnb Help Agents have done their best to get these questions answered and have failed.  Some have refused to esculated the questions to the tax department, saying the only certain questions are "legitimate" to be passed along.  Others have esculated the questions anyway and they are left unanswered.  What is the point of leaving hosts in the dark about this?  I am feeling very frustrated.

My second is a question and a request:  If my city continues to refuse to set up an account with Airbnb to collect the TOT, why can Airbnb not add this charge for hosts who request it?  The money would simply be deposited in the host's account to be paid by the host to the city.   Will Airbnb please do this?

Does anyone have more information on this?  

[Linda108]

Your city entering into the TOT collection is actually pretty late in the game.  Most cities have been doing this for years.  However, I have heard of a retroactive tax.  I am not even sure that is a legal move.  In my city, La Quinta, a contract was made for Air BNB to collect and remit the TOT a couple of years ago and I thought it was a great idea.  Then it became evident that Air BNB paid a lump sum with no connecting host identification.  Ultimately the City cancelled the contract because they felt that this process would not be able to be audited.   Now I agree to go back to the old way.  I personally just add it into my rate and advertise it as such on my listing.  It is simpler that way.  Guests often resent additional fees even though when you check into a hotel there are often several additional fees.

Other platforms do have a way to add the tax during the booking process, but not Air BNB.  Many hosts have suggested this but so far not happening.

[Udeshika0]

Hi Linda, do you know when the city terminated their contract with Air BnB? We recently bought a property in PGA West, when I set the account up at the beginning of the month, it had me set it up with the 10% TOT and brought up the local laws, however yesterday I was on the city's site and saw that they no longer are working with Airbnb and am trying to find when this took place.

[Adrienne59]

Hi Linda,  this is good information, the Airbnb's collecting and payment to the cities process of there being no connecting host id and perhaps that is why my city choose to not go with the Airbnb account.   Interesting. Do you know what Airbnb charges for that service?  That's another important piece of information.  I can understand the issue with auditing, it makes sense.  The problem with adding the TOT onto the nightly booking rate, is the the firm my city is dealing with to collect the TOT, will then charge more TOT, according to the booking rate.  Plus there is the issue of all the accounting and paying the TOT to the city each month which is a hassle. I really think this shouldn't be that hard for Airbnb to figure out, at least adding the TOT during booking process for the hosts, if not complying with the needs of the cities in regards to auditing.  I have a meeting coming with with some city officials and I'm hoping to at least understand their choices.  We are hoping that the retroactive isn't legal and also hoping we don't have to hire an attorney to fight it.  Do you know the process for the city to instigate opening an account with Airbnb, who they get ahold of and how?

[Randy-And-Barbara1]

In Oregon. Small town also getting into the Dax without representation. I get generic advice from Airbnb to consult tax person. We also feel this is a tourist penalty and would have to bother guests to collect. If you raise the rent it’s 5% of gross you can never get ahead. 

[Randy-And-Barbara1]

I have the same problem. No line for city and county penalties. And if the tot penelty is added to the cost then the gross rent is what the city wants it’s percentage off of. It’s a lose lose. The guest loses by having to pay for city expenses on things they may or may not use and the tax paying property owner/ host loses because of having to lower rates to accommodate the added tax. The only ones who come out ahead are the retailers who are the council members. Very frustrating

[Nola16]

My property is in Redding, Ca.  I am a new AirBnB host/owner.  Redding requires owners to turn in a form monthly and pay the 12% tax with the form, off the gross earnings.  They do not have an account with AirBnB and appear not to want one.  I'm not the best mathmetician but would be interested in a formula that can be used AFTER the fact, for building the tax into the nightly rate.  Then I could show my earnings as what my guests pay minus the formula for 12% deducted, and add the 12% back on the form for the City.  I would inform my guests inside the listing that the transient tax is built into the nightly rate.

Anybody out there a good mathmetician?

Thanks

Nola in Redding

[Joshua362]

Multiply all your regular rates by 1.12 (increases your rate by 12%). At end of month divide your total revenue by 1.12 (total is what you owe). Unless you have a cleaning fee or other fees that should be close enough. I just increased everything by my City’s 13% TOT. 

[Ellen55]

But then you are paying more tax because the more you charge the more you are taxed. This seems illegal also because this is a transient tax, not a host tax. I feel like because our city refuses to get it directly from Airbnb and there is no way on my Airbnb charge for me to add the tax it just goes into the nightly charge and I am now paying tax on the tax.  

[Linda108]

On the Air BNB platform, there is no automatic addition of any tax unless there is an agreement with the taxing agency - state, country, city, county.  So, the host must charge the tax separately or include it in the nightly rate.  I chose to include it in the nightly rate just because it is simpler for me and guests are not hit with an additional unexpected cost.  When I figure what I owe to the City for tax, I deduct the 10% tax first, then compute the tax owed on the amount paid for the nightly rate per City requirements.  

When I compute my income tax earnings, I deduct the City tax from my gross earning.

If I had an expensive high end listing, this might not work as the host fee is a percentage of the nighly rate.

I think this is a disadvantage of this platform and hope Air BNB will update the platform soon.