How to handle sales tax increase after booking

Chris773
Level 7
Branson, MO

How to handle sales tax increase after booking

Our local sales/lodging taxes periodically go up as various government entities continue to discover more ways to extract revenue from non-voting tourists.

 

I use the pass-through tax feature (Airbnb collects taxes on my behalf and then passes them through to me for remittance).

 

For the latest round of tax increases, we didn't actually get much more than a few weeks' notice from the county (they apparently passed the increase this spring but didn't mail notices until about a month before the increase went into effect--my fault for not paying attention to county commission minutes, I guess!), so by the time I went in and adjusted the taxes, we already had several bookings at the old, lower tax rate. Of course, when I go to report revenue and remit the taxes to the taxing authorities, they don't care when the reservation was booked, so I end up paying the tax at the higher rate even though I collected the lower rate.

 

It usually isn't a huge deal, since the tax increase is usually announced well ahead of time, and since I run smaller units, I don't book very far in advance (pre-COVID, my average lead time was 20 days), but even so, this month I ended up having to pay about $20 out of pocket more due to the increase. Not much, but every dollar counts in these times.

 

I'm wondering how the community handles these things (and what Airbnb supports/allows). I see a number of options, but they all have pros and cons:

 

  1. Just continue absorbing the difference myself as it's usually not huge (con: costs me a few lunches worth of money once a year or so)
  2. Change tax reporting methods and report on a Cash basis (e.g. when I actually collect the funds) instead of on an Accrual basis (when the reservation is consumed) (cons: significantly complicates reporting for bookings with split payments or subsequent cancellations/refunds, doesn't actually resolve the issue for Airbnb reservations because I don't collect the funds until the stay commences anyway)
  3. Manually fudge the revenue numbers I report so that the taxes due match what I actually collected (con: potentially illegal)
  4. Talk to the tax reporting agencies and see if they have a procedure for accounting for original sale date instead of item delivery date
  5. Attempt to collect the increased taxes from the guest (e.g. via Airbnb Resolution Center) (cons: potentially angry guests, potentially not allowed by Airbnb?)

What do other hosts do in this situation?

2 Replies 2

Chris,

 

Do you do this for the 4% Branson tax only? Or the entire 12.1% (state 8.1 and Branson 4)? I've been told to add 4% which will get passed to me, and then I pay, but I can't find how to do that. I'm thinking of getting the entire 12.1% passed to me....

 

Thanks,

 

Blake

The problem with passing the 4% to you is that the guest then ends up paying 13.1%, not 12.1%. The reason for that is because in western Taney and eastern Stone counties outside of city limits, there's a 1% Branson Lakes Tourism Community Enhancement District Tax (https://dor.mo.gov/business/sales/tced/#:~:text=The%20Branson%2FLakes%20Area%20Tourism,in%20the%20Br...), but for properties inside Branson city limits, the 4% City of Branson Tourism Tax covers the 1% TCED tax. But since Airbnb remits the TCED tax (because it's remitted to the state) but not the city tax (because Airbnb doesn't have a collection agreement for the city), Airbnb actually collects 9.1% (to include the 1% TCED tax) instead of the 8.1% state+county tax, so then you're basically double-remitting the 1% TED tax (once via Airbnb and once via the City of Branson Tourism Tax). There's no way to have Airbnb remove the 1% TCED tax, and there's no real way to reduce the City of Branson Tourism Tax to 3% without confusing the crap out of everyone at City Hall, so it just is what it is. (If your properties are on the far eastern side of Branson, they may not be subject to the TCED tax, but most of the City of Branson plus unincorporated areas west of the city and into Stone County--basically along the lakes--are subject to it.)

 

It's a screwy situation for guests (they overpay the tax and your property looks 1% more expensive than it should be) but the only solution is to take over remitting all 12.1%  yourself (8.1% to the state and 4% to the city), so that's what I do.