Presentation on theme: "How to Send in the Hotel Tax in SF (if you decide to do it) Rachel Donovan Presentation sponsored by Peers.org."— Presentation transcript:
How to Send in the Hotel Tax in SF (if you decide to do it) Rachel Donovan Presentation sponsored by Peers.org
Steps 1. Pay for your Hotel License 2. Tell your guests you are collecting the HOTEL TAX / TID / MED fees; show the itemized amounts 3. Submit monthly payments online and quarterly statements to the CITY. 4. Keep receipts for all your SF Hotel Tax / TID / MED payments
1. Get Your “ Hotel License ”
Registration Form (1) (how I did it) Ownership, check: Sole Proprietor Ownership NAME: Just your name Federal EIN or SSN … I simply put in my own Social Security Number. Start Date in S.F. … Must be no earlier than 15 days prior to your submittal! SF Business Tax & Regulations Code, Article 12, Section 856 (f)
Registration Form (2) (how I did it) Business Mailing Address (for your mail) … self-explanatory Business Location: Here you list all the addresses of S.F. apartments where you host short-term rentals BUSINESS NAME (DBA, Doing Business As or FBN, Fictitious Business Name) (NOT necessary! I left it blank; if you do want to register a name, you must file with SF County Clerk )
Registration Form (3) (how I did it) Primary Business Activity … brief description in your own words; e.g., “ apartment and room rentals ” Note: THE CITY will assign class “ 03 ” for “ Hotels, Apartments, etc ” Residential / Commercial Lessors Only … NOT FOR MOST OF US … this is for … owners of: 4+ unit residential building, or 2 or more rental properties in S.F., or a commercial building
Business Registration Info
How much does it cost? Annual Fee (for most of us) = $ $1 If fee is $25, it ’ s NOT pro-rated.
How do you pay? “ All new business registration forms must be accompanied by a check, cash (in person) or money order payment. Please make the check payable to San Francisco Tax Collector and submit the fees and registration form in person or via mail, to the Office of the Treasurer & Tax Collector, City Hall - Room 140, 1 Dr. Carlton B. Goodlett Place, San Francisco, CA ” BUT: Your business license renewals can be paid online (yay!). DEADLINE to submit payment for renewals: MAY 31 each year! Otherwise: $50 late penalty.
2. Collect Hotel Taxes & Fees Things to consider Which Zone is your property in (Zone 1 or Zone 2)? What are the current hotel tax rates? What does the hotel tax apply to? How do you charge the hotel tax to your guests?
Zone 1Zone 2
S.F. ZONE 1 vs. ZONE 2 S.F. ZONE 1 On or EAST of Van Ness Ave On or EAST of South Van Ness Ave On or NORTH of 16 th St from South Van Ness to the Bay, including EAST of Van Ness Ave as if it continued north to the Bay, and north of 16 th St. as if it continued east to the Bay S.F. ZONE 2 West of S. Van Ness Ave or Van Ness Ave South of 16 th Street
Hotel TAX RATES ZONE 1 Rates TOT = Transient Occupancy Tax = 14% TID = Tourism Improvement District Fee, 2% MED = Moscone Expansion District 1.25% from Jan. 1, 2014 to end of MED ZONE 2 Rates TOT = 14% TID = 1% MED = % Zone 1 TOTAL = 17.25% Zone 2 TOTAL= %
What does the hotel tax apply to? Total fees paid by guest for booking the room, including (examples) occupancy fee cleaning fee parking fees* storage fees no-show (cancellation) fees online booking fee * If you have a parking space rented by others not staying at your building, consult: SF Business and Tax Regulations Code, Article 9. Section 609. Parking Space Occupancy Tax Simplification for Residential Properties.
Advertise Hotel Tax on Airbnb
Itemize the Tax Amounts for your Guests before Booking
Newsflash: Airbnb now displays service fee to hosts before booking! In the “special offer” screen But it’s still impossible for us to calculate hotel tax on the Airbnb service fees. Because, if we increase the price to include a tax amount on the service fee, we’ll have to re-enter the total price, and now the service fee will be higher; creates an infinite loop!
If we can’t accurately calculate hotel taxes on Airbnb’s service fees, what can we do? I have included the language (in previous slide) saying that I think it’s Airbnb’s responsibility to submit the hotel taxes for their “Airbnb service fee” portion. Makes sense to me, since that’s money we have nothing to do with. Why should we submit taxes for Airbnb, on THEIR revenues??? In truth, I think Airbnb should be in charge of submitting hotel taxes for the whole amount (not just the service fee), but since they are not doing that, I am submitting hotel taxes for the portion that I receive. I hope this will cover my legal obligation in the event of an audit by the City of San Francisco.
Collecting Fees not thru Airbnb Ways to advertise Ways to get paid ---> Historically, hosts had full control over choice of payment method & sharing contact information.
Collecting Fees not thru Airbnb VRBO, HomeAway, and Flipkey have been subscription listing services. There is (or was) NO SERVICE FEE charged to the guest upon booking; only a yearly/monthly advertising fee paid by host. All 3 services now offer online payment platforms where guests can pay with credit card (minus transaction fee) or electronic check (for free, U.S. bank accounts only) Now Flipkey has changed to a service-fee model for new hosts (like Airbnb). HomeAway and VRBO are moving that way, too. But! At least they do allow you to enter a % hotel tax, itemized on the guest receipt!
VRBO / HomeAway / FlipKey
Collecting Fees not thru Airbnb Note: Online payment platforms (flipkey, homeaway, vrbo) … only show total % hotel tax, so you must itemize hotel taxes separately. Telling the guest they are paying a total of % tax is not acceptable per the code. They have a right to know the amounts and %’s for TOT, TID, and MED. I send the itemized amounts to the guest in a separate . Per the new SF Tax Collector regulation , Flipkey, VRBO, and HomeAway can be considered “an operator” because of their online payment platforms. And, with their new “service fee models,” now they (or someone) is responsible for submitting hotel tax on the added-on service fees, too. Before, when VRBO/HA/FK did not deal with payments AT ALL, it was clear that the individual host was the operator. Now, with these online payment platforms and regulation , VRBO/HA/FK may be on the hook for hotel taxes like Airbnb.
Taking Reservations Directly So far this is the only way I know of to process the Hotel Tax properly, because there won’t be any weird service fees added on, and you don’t have to use someone else’s online payment system. Just write up an invoice itemizing the correct amounts, and then ask for payment, in whatever form you choose (check, cash, Paypal, bitcoin, credit card, etc). This is possible for VRBO/HA/FK subscription users because you’re not required to use their proprietary online booking system. It’s merely an optional tool you can use if you want. If you’re using FK’s pay- per-booking service, unfortunately you do not have the option to take reservations directly.
How can you take Credit Card payments directly? Create your own merchant credit card account (www.paypros.com/homeaway/index.asp)www.paypros.com/homeaway/index.asp Paypros transaction fee is 2.5%, and your guest pays no service fees! Or you can use PayPal.
3. Send Pre-Payments & File QTRLY Hotel Tax Statements Hotel Tax (TOT, TID, MED) statements are due every quarter (that’s every 3 months) to the City of SF Treasurer (due April 30 for Q1, July 31 for Q2, etc) Prepayments (TOT only) due monthly. Monthly prepayments and quarterly statements are reasonably easy to submit online.
3. Send Pre-Payments & File QTRLY Hotel Tax Statements
4. Keep Receipts / Records Save receipts for hotel tax / business license renewals, etc … these are for DEDUCTIONS against your rental income (Form 1099-MISC). Keep an accurate record of all guest names, rent amount & dates of stay, in case of an audit (by IRS or City of SF)
Need help with hotel tax? Try Hot Spot Tax Services Ian from beyondstays.com uses Hot Spot Tax Services to calculate the hotel tax in Airbnb. Hot Spot Tax has been around forever and is the one touted by HomeAway / VRBO. They have a very good reputation. I haven’t used them personally because with only 1 property, it’s not that much hassle to submit the hotel taxes myself.
More on Hot Spot Tax Ian said that Hot Spot Tax “back-calculates” the amounts from the Airbnb rate. This means the hotel tax is deducted from the total rate advertised on Airbnb. Technically the hotel tax should be added ON TOP OF the advertised or agreed-upon nightly amount, just like sales tax. But for right now, I’m guessing this method would be good enough. Hopefully the City would agree that this is better than not submitting the taxes at all. Just be aware that if the SF Treasurer ever decided to audit Hot Spot Tax, and if they truly are back-calculating, it’s possible SF Treasurer could charge Hot Spot Tax with underreporting. The GOOD NEWS is, Hot Spot Tax assumes all responsibility for errors (according to their web site), so apparently those underreporting charges and fees would be borne by Hot Spot Tax Services.
What Can Airbnb Do? If Airbnb would contract with a business like Hot Spot Tax services, it would be easy for Airbnb to submit hotel taxes all across the U.S. (so the hosts wouldn’t have to do any of this paperwork) … and Hot Spot would assume all legal responsibility for any errors, etc. Seems like a good insurance plan on the part of Airbnb! Many cities, counties, towns, and states have hotel tax rules which Airbnb and most of its hosts are ignoring. Any number of these municipalities have every right to go after Airbnb asking for back taxes and penalties. Could be a very expensive situation for Airbnb. If Airbnb refuses to do that, they could at least agree not to tack the airbnb service fee on top of amounts destined to go to hotel taxes. Unfortunately, then the hosts would still be responsible for calculating the hotel tax on the Airbnb service fee and submitting the amounts to the City, which I think is very unfair!!! But at least this would make the full hotel tax calculation possible, without going into an infinite loop.
So now you know how, but why (or why not) pay hotel tax? Planning Code Violations: Paying the hotel tax would not “tip anyone off” for planning code violations as the Treasurer does not work with the Planning Dept. in this way. The Planning Dept will issue “cease and desist” letters based on citizen complaints. The fact that you were or were not paying hotel tax should have no bearing at all on their decision. Many “cease and desist” letters have been issued, but so far I have not heard of any that were issued for hosts who were paying hotel tax. But it shouldn’t make any difference. Buildings with 4 or more units: with the recent update to the Vacation Rental ban, citizen groups (not just people living in the building) can file complaints about illegal short-term rentals. Thus, you may not want to publicly declare your activity. On the flip side, perhaps the City would be more likely to accept your operations, if you were already in the system as a hotel tax payer with a hotel license. For landlord/tenant situations, paying the TOT would be evidence of short-term rentals; if in violation of your lease, you probably don’t want this evidence to be available.
Hotel Tax is nothing new … Vacation rentals and short-term / shared housing hosts have been paying the hotel / lodging tax all across the USA for decades. It’s the norm in the industry. When we pretend we are exempt as Airbnb hosts, we don’t have much of a leg to stand on. The only difference between Airbnb and older advertising web sites is that Airbnb not only advertises, they do our bookkeeping and bill collection, bank transactions, too! That’s great! So much easier for us! But it doesn’t change anything about the service we are providing. Knowing that our bookkeeper is not submitting the taxes which are owed, are we not liable as well?
Stats on Hotel Tax Funds Approx $300 million total in 2012 Year 2012: $200 million to City of S.F. General Fund (largest single contributor to the city’s general fund !) $37 million to SF Grants for the Arts (theater, dance, music, cultural programs) TID goes to stable and adequate funding for the San Francisco Travel Association (funded 65% of their $26.2 million operating budget) (web site out of date; typical!) MED funds capital improvements, upgrades and expansion analysis for Moscone Center.
Hotel Tax Allocation, 2012/13 Fiscal Year (prior to implementation of MED)
Good P.R. for short-term rentals For those short-term rentals that are not violating a rental lease, or the vacation rental ban, or a condominium agreement … (is there anyone left?) Paying the hotel tax is a great way to show that we are “good citizens.” When we pay the hotel tax, we cannot be accused of “stealing tax revenue.” It is clear to everyone that we are in fact giving back to the community.
Resources SF Planning Codes ENFORCEMENT NOTIFICATION (example, issued January 10, 2012, to short-term rental in single family home, Pac Heights) Planning Code Section 176. Code Violation: 209.2(d): Other Housing (Short-Term Vacation Rental Use for Transient Guests) Up to $250 Each Day of Violation (but so far I haven’t found the code applying to residences with kitchens) (Are the violations valid?) Unfortunately the Planning Code web site is difficult to navigate. It has frames so I can’t paste specific links to code. SF Admin Code Chapter 41A “ Vacation Rental Ban ” -- Read FULL TEXT HERE GO TO: "Administrative Code" and then (in the left-hand section) click on "More" and then "More" again to get down to Chapter 41A. Depending on how you read it, either it only applies to buildings with 4 or more units (if read with an implied comma), or, as written, without the comma, it could possibly apply to any room meant to be occupied. SF Hotel Tax Tax Collection Regulation Business Tax Regulation Code Article 7 “TAX ON TRANSIENT OCCUPANCY OF HOTEL ROOMS.” Sections Go to Vacation Rental Tax FAQ https://www.homeawayconnect.com/salestaxfaq.aspx?culturename=en-US https://www.homeawayconnect.com/salestaxfaq.aspx?culturename=en-US Basic Hotel Tax Info Coming Clean about Hotel Tax Sales Tax 101 (30-minute interview with CPA from Hot Spot Tax Services)