What happens when Airbnb or Vrbo collect lodging taxes for short-term rental hosts?

Taking care of lodging taxes has been part of the business of operating a short-term rental for a long time. But lodging tax compliance has gained a higher profile in recent years. Governments from the state to local level have realized how valuable vacation rentals can be in terms of tax revenue. Many have levied new taxes that apply to short-term rentals or made more of an effort to ensure vacation rentals collect existing taxes.

Short-term rental operators don’t pay these taxes out of their own pocket — guests do. But hosts are responsible for collecting these taxes at the time of payment, registering with local tax authorities, and filing regular lodging tax returns.

While lodging tax compliance is simply a part of running a short-term rental business, it represents an administrative burden — and hosts appreciate anything that can make it easier.

For several years, short-term rental marketplaces such as Airbnb and Vrbo have attempted to take some of this burden from hosts by collecting lodging taxes from guests when they pay for their stays and sending the taxes on to authorities. This is possible through agreements with tax authorities in specific jurisdictions. If a marketplace doesn’t have an agreement with a jurisdiction, it doesn’t collect lodging taxes there.

In recent years, marketplaces have greatly expanded the number of agreements across the U.S., so the number of collection jurisdictions is increasing. Also, some governments now require marketplaces to collect lodging taxes for all of their listings. The result is that a growing number of short-term rental hosts now have their marketplaces collect and pay lodging taxes for them.

However, even if your marketplace is collecting lodging taxes for you, you may still have compliance obligations you need to take care of yourself. In most places, the host is still responsible for lodging tax collection, even if their marketplace helps, and that requires hosts to be proactive about making sure they’re following the rules.

Short-term rental tax regulations are highly local in nature, so jurisdictions can have vastly different rules. It’s up to you to know which jurisdictions and rules apply to your individual property.

Here are a few questions you should ask when your marketplace is collecting lodging taxes for you.

It’s rare that short-term rental hosts are responsible for collecting only one tax. More often, the total tax amount you collect from guests is made up of a variety of taxes from different jurisdictions including sales and lodging taxes.

For example, in Austin, Texas, short-term rental hosts are required to collect a total lodging tax of 17% from guests and pass it on to tax authorities. This includes a 6% state hotel occupancy tax and an 11% city hotel occupancy tax.

Your marketplace may have collection agreements with some jurisdictions and not with others, so it may collect only some of the taxes you’re responsible for.

In Austin, for example, Airbnb and Vrbo automatically collect the state portion of the tax for bookings on their platforms, but Austin Airbnb hosts must collect and remit the city portion of the tax themselves.

Many hosts list their properties on more than one marketplace, and may book directly with guests as well. You shouldn’t assume all the marketplaces you work with are collecting lodging taxes for you.

For example, in Palm Desert, California, short-term rental hosts are required to collect transient occupancy tax (TOT) from guests and file monthly occupancy tax returns. Airbnb collects TOT for short-term rental operators in Palm Desert, but Vrbo doesn’t. If you list your property on both Airbnb and Vrbo in Palm Desert, you’ll need to do your own tax collection for any bookings through Vrbo. And if you’re booking directly, you’re solely responsible for lodging tax compliance.

It’s important to know that in most cases, vacation rental marketplaces do not register for you or report your earnings or the amount of lodging tax paid on your behalf to tax authorities.

In a few jurisdictions, such as Indiana, short-term rental marketplaces are required by the government to collect taxes for you when the listing is booked. You're only responsible for reporting lodging taxes if they're not being collected for you.

But in most jurisdictions, you must still register with tax authorities and file lodging tax returns in order to report your short-term rental earnings and taxes collected — even if Airbnb, Vrbo, or another marketplace is collecting for you.

Since one size doesn’t fit all when it comes to vacation rental regulations, the only way to know if you’re complying with local lodging tax rules is to get to know the rules yourself — which is sometimes easier said than done.

Or you can seek help from MyLodgeTax, which simplifies and automates lodging tax compliance. MyLodgeTax makes sure you’re registered with the right jurisdictions and filing all required returns on time — whether your short-term rental marketplace is collecting for you or not.

We’re here to help. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.