Are your clients paying all the taxes they're responsible for? If they're renting out their home via a site like Airbnb, maybe not.
"Vacation rentals have become a very popular segment in the travel industry and are growing very rapidly, Rob Stephens, co-founder and general manager of HotSpot Tax, told ThinkAdvisor on Wednesday. "You've got a lot of people all over the U.S. who can put their property on one of these websites and connect to a global travel audience."
A lot of those people are renting their property on their own through Web services like Airbnb or VRBO. It may not even occur to them, but "when you're short-term renting a property anywhere in the U.S., you're essentially operating as a hotel, and you have to collect the same tax a hotel would," Stephens said.
Guests pay the lodging tax, but landlords have to collect and remit them to the appropriate authority, Stephens said.
HotSpot Tax was recently acquired by Avalara, and is transitioning to a new name, Avalara MyLodgeTax.
HotSpot Tax automates tax collection for short-term landlords. "Most of our customers have to pay a state tax plus a city tax, or a state tax plus a county tax, so there's multiple levels of taxation and multiple tax agencies involved," Stephens said. "For the layperson who in their mind is just renting their home, it's not typically in their sphere of awareness."
HotSpot Tax will register for and obtain any licenses or tax accounts the user needs depending on the state their property is in, then remit the taxes quarterly or monthly as due.
"When a customer reports their figures to us it generates an electronic bank debit. It takes them probably 30 seconds each month to report their rent to us, then based on their information, we file and pay the taxes wherever they're due. We electronically debit whatever tax is due, plus our fees, from their bank account."
The company also handles correspondence and delinquencies with the approprtiate tax authority, Stephens said. "Some of these licenses require annual renewal. The way we developed our model and what we represent to our customers, we guarantee you're fully compliant."
He added, "If you're on Airbnb or VRBO, all you have to do is sign up for our service. We'll tell you what taxes you need to collect; you collect them on each booking; and we're going to file and pay all that each month, each quarter and guarantee it's correct. Our service is around $12 a month, depending on where you're located."
Stephens said his firm is effectively an accountant for its customers. "We're really no different. We're their representative. We're signing their forms. We're filing their returns, paying their tax, doing everything a full-service accountant would do, except we've automated it all."
