Acts Like A Hotel, Tax Like A Hotel?

When it comes to Airbnb, the sharing economy, and taxation, there are many shades of gray, writes Renu Zaretsky of the Tax Policy Center. Is a stay in someone’s home a “friendly, casual relationship” or “something more formal?” And is that the threshold question, anyway, when it comes to use and occupancy, property and income taxes?

Some background: One in ten Americans (11 percent) used a home sharing service last year, according to a survey by the Pew Research Center. Like ours, the majority of rentals, 63 percent, are for an entire home without the presence of the owner. Our host lives in her home most of the time, but travels a lot. When she is in town and has paying guests, she stays with her mother down the road. …

In many jurisdictions, hosts must collect occupancy taxes from their renters. We owed Michigan’s 6 percent use tax on our rental fee which our host was to collect. But, like about one-third of hosts in Michigan, she didn’t, leaving it to us to report our online transaction and pay the state.

In Michigan, at least, that’s about to change: As of July 1, Michigan short-stay renters will pay the tax when they rent through a sharing platform, which remits to the state treasury.

Then, there is a matter of property taxes. Many jurisdictions have homestead exemptions that reduce taxes for owner-occupied homes. Were we vacationing in our host’s home, or in what is effectively a commercial rental property? The local county has lots of rules about whether our host would be eligible for a exemption of up to $1,800. Does she qualify? It is hard for us to know and probably difficult for jurisdictions to check.

Finally, there is the matter of income taxes. Tax accountant Tony Nitti has a nice primer on the topic in Forbes. The general test: How many days per year does our host rent her home?  …

I hope our host gets good tax advice. Of course, there’s something about the need for a good tax accountant that makes the relationship between my family and our Airbnb host seem a little more… formal, don’t you think?

Learn about the nuances of the taxation debate and Airbnb at this year’s annual MACo Summer Conference, “You’re Hired!” During the session, The New Look Vacation: Opportunities & Responsibilities in the Sharing Economy, county tax collectors, Airbnb representatives and the traditional brick and mortar hotel industry all come together to parse out how to ensure local hotel taxes are collected equitably without unduly burdening new emerging opportunities for our residents.

Learn more about MACo’s Summer Conference: