A Tax by Any Other Name is Still a Tax
In nearly every state, county and municipality in the U.S., transient income, or rent collected on your vacation rental, is subject to sales tax as well as other taxes that are unique to lodging. We are all familiar with sales taxes that we pay everyday on the goods we purchase, such as TV's, cars, tennis shoes, office supplies, furniture, etc. Just like these items, rent collected from guests of vacation rentals are subject to sales tax, but there are numerous other taxes that apply to vacation rental activity as well. The names of these taxes are more obscure. The following is a partial listing of commonly used tax names along with some of the tax jurisdictions that use this name:
- Transient Occupancy Tax (TOT), frequently used by counties in California
- Tourist Development Tax (TDT), used by Florida counties
- Transient Accommodations Tax (TAT), used in Hawaii
- Hospitality Tax/Fee, frequently used by counties in South Carolina
- Lodging Tax-broadly used
- Accommodations tax, broadly used
- Hotel/Motel Tax, used in Texas, Arizona, Georgia and Washington
- Room tax, used in Kentucky
- Meals & Rentals Tax, found in New Hampshire
- Nightly Rental Tax, used in Missouri
- Occupancy Tax, used in North Carolina, New York, Tennessee and Texas
- Transient Room Tax, found in Oregon
- Resort Communities Tax, used in Utah
When you are searching for your property's tax requirements, try some of these names in Google (other search engines) or the website of the appropriate state and local governmental agency. Search terms such as 'vacation rentals taxes',' condo taxes',' second home' and the like, will generate few, if any, helpful results.
Vacation rentals are taxed by state and local governments as a business activity, usually defined as 'Transient' occupancy or 'Transient' rentals. 'Transient' typically refers to short term rental, as opposed to long-term rental (such as the rental of an apartment or home under a six month or one year lease agreement). It is the property owner's responsibility to collect these taxes from the guest, just as any retail store is responsible to collect sales tax on the goods it sells.
It is important to check for tax requirements at the state level AND the local level, which means the city and county where your vacation home is located. When you are researching the tax requirements for your vacation home, look first under sales taxes, but if you can't find any specific or helpful information, it is important to check under these other tax names. As a general rule, it is most common for vacation rental activity to be subject to sales tax at the state level, but subject to a different tax at the local level (such as lodging tax or accommodations tax). Keep in mind that you may be subject to two different taxes at any particular tax jurisdiction as well. If you find you are required to collect sales tax, you may also be subject to another form of tax at the state, city or county -- so keep checking. For instance, the following are just a few examples of areas with multiple taxes:
* South Carolina charges an accommodations tax in addition to the state sales tax, plus the most cities and/or counties charge an accommodations tax
* Many of the resort towns in Colorado charge BOTH sales and lodging tax, or some other form of tax in addition to sales tax. Many of the counties in Colorado also charge a lodging tax in addition to sales tax. The state also collects a state sales tax.
* Hawaii charges a Transient Accommodations Tax in addition to the state General Excise Tax (which is Hawaii's name for sales tax)
* In Florida you are subject to sales tax at the state and county level, as well as Tourist Development Tax at the county level
* In Texas, you are not subject to sales tax, but you are taxed under the Hotel Tax requirements, (plus additional taxes at the city and/or county level)
These are just a few examples, as there are an estimated 7,000 state and local tax jurisdictions in the U.S. The good news is that you, as a vacation home owner, only need to worry about the sales and lodging taxes where your vacation property is located.
Due to the complexity, importance and administrative burden of these tax requirements, homeaway.com has partnered with HotSpot Tax Services (www.hotspottax.com), a company solely dedicated to helping vacation property owners with tax compliance. HotSpot offers a low cost effective, guaranteed solution to handle all of these compliance issues for you.
HotSpot's one-of-a-kind service offers the following benefits:
1. An easy, low cost solution to help you comply with sales and lodging tax laws.
2. A complete solution - HotSpot does all the research, registrations, filings and handles all correspondence with tax authorities.
3. A simple online service that allows you to report your taxes in seconds and view your tax history by month down to the detail of each tax calculation.
4. Guaranteed service, so when you join, you never worry about compliance again.
5. An obligation-free policy that means you can try HotSpot's service, use it as long as you like and cancel at anytime with no penalties
6. A cost that is less than you may expect - HotSpot does all of this for an average of only $10 a month.
Article written by Robert Stephens. Rob has 17 years of management experience in operations, accounting and finance. He has served as CFO of several companies ranging from early stage enterprises to public companies and has experience in all types of financing and transactions. Rob is the co-founder of HotSpot Tax Services, a company solely dedicated to helping vacation property owners with sales and lodging tax compliance.
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