| By
Rob Stephens, Founder of HotSpot Tax Services
Each year, in the spring, I gather all my records, update
QuickBooks and file the federal and state income tax return for my Vail
vacation home, which we hold in an LLC. Filing these tax returns is an annual
event for me; however, there are additional sales taxes on my Vail vacation
home that I am required to pay quarterly. These additional taxes fall into a
broad category that I will call Sales Taxes. When I purchased my
vacation rental and started renting the property I was surprised to learn, even
as a CPA, that my little side business of renting my vacation home was subject
to state and local sales taxes. I discovered that any rental activity, no
matter how small or insignificant, is subject to the sales tax requirements of
the state, county and city where my vacation home is located.
Throughout the U.S. these taxes are also referred to as
accommodations, occupancy, hotel, bed, room, tourist development and rentals
tax, just to name a few. Sales taxes are charged on the rent collected from
guests. State and local statutes treat virtually all vacation homes in the same
manner as a hotel or motel. Vacation rentals are considered businesses by tax
authorities, and therefore, are required to obtain a business license and
collect and remit sales taxes on the rent collected. These taxes are entirely
different requirements than reporting your vacation home activity as part of
your federal or state income tax return on April 15th each year.
A couple important points to note; first, the renter pays the
tax as an additional fee to the rent charged, and secondly, I must collect and
remit this tax even though I may be reporting a loss for income tax reporting
purposes. Virtually every vacation home, particularly in resort areas, is
subject to these types of sales taxes.
The following lists a few of the differences between income
taxes and sales taxes:
-
Federal income tax returns are reported annually. Sales tax returns and
payments are usually required to be filed monthly or quarterly.
-
Federal income taxes are filed with the Internal Revenue Service. Sales tax
returns and payments are made to the state, county and/or city where your
vacation home is located.
-
Federal income tax is a tax charged on income or profits (revenues less
expenses), whereas sales tax is a tax on revenues (the amount you charge your
renters).
-
Even if you have no rental activity you are required to file the monthly or
quarterly sales tax returns.
If you need help with sales and lodging taxes, HomeAway.com
recommends that you utilize the expertise of HotSpot Tax Services (www.hotspottax.com).
HotSpot Tax Services offers a low cost, effective, guaranteed solution for
sales and lodging tax compliance specifically for vacation rental homeowners
throughout the U.S. Call HotSpot at 877-589-0207 or visit
www.hotspottax.com
to learn more about sales and lodging tax requirements in your area.
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 mergers &
acquisitions transactions. Rob is a co-founder of
HotSpot Tax Services, a company solely dedicated to helping vacation
property owners with sales and lodging tax compliance.
|