Related: New 2017 Airbnb Legal Issues
As a form of a rental expense, Airbnb taxes and fees are unique in some ways. For starters, you have no control over the tax rate, while you have more control over other expenses, like renovations and repairs. And while expenses like renovations and repairs are not always or necessarily mandatory, Airbnb taxes and fees are. Different Airbnb tax rates in cities are things to consider for your overall Airbnb cash flow. So, that begs the question, which cities have the worst tax rules for Airbnb?
A great place to find an answer is in R Street’s Roomscore 2016 study. The report assesses the short-term rental (including Airbnb) regulations in the largest 59 cities across the United States. There are 5 different criteria in which cities are assessed, and tax obligations is one of them.
According to the report, laws and regulations for Airbnb taxes and fees in all of the 59 cities were not that significant in influencing the overall ranking. In fact, most of these cities scored very high or moderately level in the report. Still, though, Airbnb taxes and fees can influence your cash flow, but maybe not to any extreme or worrisome level. Here are the five cities mentioned in the report and their tax rules according to Airbnb.
Transient Occupancy Tax. You’ll hear that term a few more times in this blog. This tax is set for hotels and short-term rentals in California and many other states. According to Airbnb, hosts in Oakland are required to pay 14% of the listing price (including cleaning fees) as a transient occupancy tax for reservations that are 30 days or less.
By Oakland’s definition, a short-term rental is used for 30 days or less, so Airbnb is included by default. Hotels are also required to pay at the same rate for this tax. So why is Oakland on this list if both short-term rentals and hotels pay the same rate for this tax? Well, according to the Roomscore report, short-term rentals in Oakland pay a higher rate in gross-receipts tax. In other words, Airbnb guests in Oakland have to pay more in the overall taxes of their property compared to hotels.
2.) San Francisco
Once again, the transient occupancy tax is implemented. Just like in the previous Californian city, San Fran’s transient occupancy tax rate is at 14%, including any guest fees and cleaning fees. Unlike Oakland’s tax rate, however, the tax applies to reservations that are 29 days or less. Just like Oakland, the tax is collected and remitted by Airbnb. However, unlike Oakland, you may not have to pay the transient occupancy tax. Airbnb is the only Qualified Website Company in San Francisco. So, if you only rent through Airbnb, you aren’t required to pay the transient occupancy tax. San Francisco and Airbnb have a history of legal issues, to say the least. Be sure to check out the most recent complication here.
3.) Portland, Oregon
Unlike the two previous cities, Portland hosts are required to pay a transient lodging tax. As a matter of fact, Portland is unlike all other cities in the country in this regard; it is the only city that requires short-term rentals to pay a transient lodging tax. A transient lodging tax is a tax on renting rooms to transient occupants, i.e. guests, for any time less than 90 days. As in most cities, a short-term rental is defined as a rental for guests for 30 days or less. According to Airbnb, Portland hosts are required to pay a transient lodging tax of 6% of the listing price and cleaning fees. Even with its Airbnb taxes and fees issues, Portland is a great place to rent for this year, whether it’s traditional or Airbnb.
4.) Orlando, Florida
The City Beautiful isn’t so beautiful when it comes to the different Airbnb taxes and fees hosts have to take into account. For starters, there’s the tourist development tax. In Orange County, where Orlando is located, this tax is at 6% of the listing price including cleaning fees for reservations of 182 days or less. Then there’s the transient rental tax, in which all counties of the state must pay. Just like the tourist development tax, this tax is set as 6% of the listing price including cleaning fees for reservations of 182 days or less. Finally, there’s the discretionary sales tax. Like the development tax, this tax applies to all Florida counties. This tax is at 0.5-1.5% of the listing plus cleaning fees. Why are Orlando’s taxes applicable for 182 days or less? A short-term rental in the city is set for 6 months or less, unlike 30 days or less in most cities.
5.) Galveston, Texas
The Island of Texas has a relatively similar Airbnb taxes and fees rate compared to the other cities on this list. A total of 15% of the listing price and cleaning fees, 9% from local tax and 6% from state hotel occupancy tax, accounts for the Airbnb taxes and fees of Galveston. The hotel occupancy tax is pretty moderate itself, sure. However, according to the Roomscore report, hosts must report on this tax monthly, regardless of rental activity. Sounds annoying, because it is. Nonetheless, the city was an A+ in the report, so the overall impact of the city’s regulations may not be very detrimental.
All in all, Airbnb taxes and fees should be in the back of every host’s mind. It may not worsen the overall hosting experience, as in Galveston and Orlando. Regardless, the Airbnb taxes and fees rules of these two cities, and the others mentioned, are not pleasant. At all.
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