Got the below letter from the State's Department of Revenue last week.
I'd been paying income tax all along, and my city (Philadelphia) recently passed regulations requiring those of us who do short term rentals to pay the City's hotel tax, which Airbnb has recently begun collecting on behalf of hosts. The letter states that I owe back taxes for the State's Hotel tax, going back to 2013.
I wrote to Customer Service seeking guidance, and was pretty much referred to the terms of condition that state that hosts are solely responsible for obeying local laws, regulations, and for paying taxes. I absolutely want to pay whatever taxes I owe/operate within the law, but this seems excessive.
So, I now have to pay city and state hotel tax on top of income tax. I think taxes are now approaching 50% of income. Not to mention $2-3,000 in back taxes for renting out my one spare bedroom.
Airbnb is currently collecting the Philadelphia City Hotel Tax from guests, at booking, on behalf of hosts - they started doing so in October of 2015. Good idea to find the State ordinance & to read that.
The letter I posted above did not specify any particular figure. Did my photos come through? I don't know how the state got information that I've been rending my room, but the 1099 seems a logical answer. That, and I have declared the Airbnb income, and provided a copy of the 1099 on my City, State and Federal income taxes over the last three years.
Pennsylvania hotel occupancy lodging tax
Chapter 38 Hotel Occupancy Tax
Hotel—A building in which the public may, for a consideration, obtain sleeping accommodations, including establishments such as inns, motels, tourist homes, tourist houses or courts, lodging houses, rooming houses, summer camps, apartment hotels, resort lodges and cabins and other building or group of buildings in which sleeping accommodations are available to the public for periods of time less than 30 days.
Curt’s comments, “ need to determine definitions of above terms to see if you are a “hotel” as defined above.”
From article 7-22-2014 http://www.wearecentralpa.com/news/zoning-board-rules-against-tourist-homes
STATE COLLEGE, CENTRE COUNTY - A decision has been made on a controversial zoning issue in a Centre County borough.
The State College Zoning Hearing Board decided the way two borough homes were being used were in fact for "tourist home" purposes and say it won't be permitted.
The two homes at question are zoned as R-2 residential properties, meaning they are specifically designed to be a single-family home in a residential zoned neighborhood, but these two properties are being used for what the borough and neighbors are calling "tourist homes."
"It takes away from the neighborliness of the neighborhood," Janet Engeman said.
Engeman is pleased with the Zoning Hearing Board's decision Tuesday.
"This is what I was hoping would take place," she said. "I live just a couple doors away from those properties and we've been aware of the problem for quite some time."
She, other neighbors and the zoning board said 612 Walnut Street and 138 West Prospect Avenue are being advertised as vacation homes. They're often rented out on a short-term basis for special event weekends, especially during Penn State's football season.
Neighbors said not having consistent residents in the homes goes against code and is making their neighborhood less neighbor-friendly.
Now, the borough said this type of transient housing isn't allowed.
"The critical matter here was that the two owners were not occupying those two homes," Stanford Lembeck, Chairman of the Zoning Hearing Board, said. "They live some place else."
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Boarding house—A building or portion of a building occupied for human habitation in which five or more persons, not related to the proprietor or manager, are furnished with meals and lodging.
Lodging house—A building or portion thereof in which five or more persons, not related to the proprietor or manager, are furnished with sleeping accommodations and shall include rooming houses, bachelor apartments, dormitories, barracks, bunk houses and other kinds of buildings used to furnish sleeping accommodations.
Curt’s comments: “so you are not a boarding or lodging house unless 5 or more persons were staying there.
Rooming houses: There seems to be no definition in the above PA law so:
AMERICAN SOCIETY OF PLANNING OFFICIALS
1313 EAST 60TH STREET — CHICAGO 37 ILLINOIS
Information Report No. 105
A Problem of Definition
Hundreds of zoning ordinances have loopholes that permit group living arrangements. In most of these cases, potential difficulties are caused by unsatisfactory definitions. It is always nice, of course, to have at least a general idea what an ordinance is talking about when it uses a particular term. But technicalities are particularly important in this field. Sloppy definitions enable the promoters of unwanted group living arrangements to claim that it is some other use that is on the permitted list. Unhappy neighbors have occasionally unexpectedly been forced to adjust to 40 or 50 fraternity brothers living together in a one-family zone.
Three important distinguishing characteristics of group living quarters are laid down in the zoning ordinance of Bismarck, North Dakota (1953):
Curt’s comments “so you do not seem to be a “lodging houses” “.
I am not sure what your redress is but you seem to not fit the definition of hotel as long as you occupy a portion of the house and have had 5 or fewer guests at a time. I would politely tell them to pound sand. I am not a lawyer but would suggest you send a polite letter to the State and say that you do not fit their definition of hotel. You simply occasionally rent a room in your house that has not been modified in any way to change the single family characteristics and that you did pay income tax on the Airbnb activity and see what comes next. For the form I would check off $0 as hotel income send the form and the letter back to them.
Regards, Curt and good luck
More thoughts on this. Suggest you simply send the form back in that you owe $0 dollars and maybe a very short letter that you are not a "hotel" as defined by Pennsylvania law. Don't add all the stuff that I sent you as to why you are not a hotel. But...... put them on the point of proving that you are a hotel. Put them on the defensive and make them do the work to prove that you are a "hotel" which I feel you are not. This process could take many months. Don't panic. Hang in there. Again I am not a lawyer but do you have a lawyer friend that may know something about real estate law to contact. In my legal activity with Michigan tax litigation I have an action that affects my taxes that I am fighting and will win but it takes time. Just relax for a bit and fight this. At worst it will be an additional interest penalty but at best you will owe nothing.
Regards, Curt Traverse City Michigan
Jumping back in here to provide a follow up.
I talked to a lawyer, who, unfortunately said that the state's definitions are so broad as to be almost meaningless. He also said that fighting this would be a long, time consuming process.
I also talked to my accountant who is trying to get a handle on things on his end.
I also called Airbnb's San Francisco # & was told my case would be forwarded to the tax department. I send the CS agent a copy of the above State letter. After close to a week, I got this response from Airbnb. (hmmm. I thought I could insert an image into the response, but the camera icon doesn't seem to be working properly. I'll copy & paste)
Grrr. Can't copy & paste either! Urrrggg. As if this weren't annoying enough!
Here's what the Airbnb Tax Department responded with:
We are filing one tax return per jurisdiction, with the total combined reservation revenue. This means that all hosts located in Florida will be represented by one remitted amount, and we will not be providing your personal information on the return. We're dedicated to keeping your personal information private - if at any point we're required to share any information with your local government, you'll be specifically notified.
Hosts may view the amount of occupancy tax paid by guests in the Gross Earnings section of their Transaction History, and can confirm which juristictions are being accounted for from Manage Listing>Location, underneath the Adress section.
This can also serve as documentation of said taxes being collected, paid for and remitted on your behalf.
In 2016, Airbnb plans on getting more detailed CSV for our hosts that include a detailed account of tax amounts.
Let me know if I can continue to support.
I see very little way that his email actually related to my situation. Am I missing something? Does this make any sense???
I can see why Airbnb is not eager to jump in and tell you whether you owe these taxes or not, or offer an interpretation of Pennsylvania law that could get them in trouble.
I also received this letter and looked up the same PA code. Without commenting on whether either of us run a "hotel" it seems that as written, if you have a building where the public can pay to stay for periods under 30 days, then you have a "hotel" as the law defines it.
Yeah, I get that. What I'm still not completely sure about is which taxes Airbnb is collecting. The letter says there's a 1% city hotel tax, and my understanding is that Airbnb was to begin collecting city, but not state taxes. But Airbnb is collecting a lot more than 1% in taxes. So, how do I (and my accountant) know which taxes to pay? Do you know?
Airbnb collects the 8.5% city hotel tax (which is authorized by this state law) and sends it to the city.
Airbnb does not collect the state hotel tax (established by PA code 38.1-3). This tax is 6% statewide except for Philadelphia and Allegheny County, where it is 7%. The extra 1% is not a city hotel tax, but rather an extra bit of state tax in those places.
The PA Dept of Revenue confirmed to me that the state tax they talk about in the letter they're sending out is provided for by PA code 38.
They also said that:
• In general the state and the city share information. So I would assume that the state simply obtained a list from the city of all the people who have paid (automatically via Airbnb) the city hotel tax and sent them the letter.
• As far as properly registering to remit Hotel Occupancy taxes, once they receive your form they will decide if you need to register (if you have only rented your place once or twice, maybe not) and tell you what to do.
Thanks so much, Rich, for your detailed information. Do you know WHEN Airbnb started collected taxes for the city? I can't find the information anywhere, and my accountant believes I need to pay it for the entire year 2015.
According to Airbnb - they have shared no information with the City or State about who their hosts are - that they submit the taxes only as the revenue from Philadelphia...
But how do you know AIRBNB is just keeping the taxes they collect and not sending the occupancy taxes in to the local city or county? I talked to a tourism tax person here in Monroe County in the Florida Keys. She said that Airbnb was not fowarding the occupancy taxes they collect for you. Since the host is responsible, the local county can still tax you for these occupancy/tourism taxes that Airbnb has not submitted. i suggest that you verify that the city or county did recieve these local taxes that Airbnb collects for you. If not seek a lawyer. What we need is proof of the occupancy/tourism taxes being paid.
Thre, Airbnb will submit all these 1099 forms to the state and your local counties. I suggest you raise your rates on your rentals to cover these additional taxes to protect yourself.
Just my opinions,
Another intrusion on property homeowners, they tax you endlessly. Your one main house should be free of all taxes. But if you do not pay for property and state taxes on your home,who will? We are a taxed nation!
Airbnb is collecting 8.5% in occupancy taxes - you can see the details under your account, transaction history, and click on gross earnings - airbnb started to collect and pay the taxes directly to the city of Phila since August 2015. Based on the letter you have received, the state wants to collect 2013 and 2014 "unpaid" occupancy taxes - please keep us posted if you have any news about this very important issue. I have not been able to find much since apparently this is a relatively new event. Thank you!
Thank you for your response! The 8.5% Occupancy tax collected by Airbnb is for CITY of Philadelphia taxes. Those taxes are distinct & completely separate from the 7% (6% statewide, with an extra 1% for Philadelphia) Commonwealth of Pennsylvania Hotel Tax. Seems we are responsible for paying that tax from 2013 on, unfortunately.