Sales Tax Slice: Inauguration Day Travel Taxes Transcend Politics

Inauguration Day is almost here. And with it come many visitors to the Washington metro area. In fact, the District is preparing for a million inauguration visitors and protestors over the weekend, The Washington Post reports. The Women’s March on Washington alone expects 200,000 protestors, according to USA Today. Just where all these visitors are going to stay and whether they’ll be paying sales and use tax on their lodgings remains an open question.

While some individuals are opening their homes for free, many others are listing their apartments, condos and homes for rent on Airbnb. Whether these Airbnb rentals are taxable (and whether Airbnb remits tax on their rentals) varies from jurisdiction to jurisdiction and has been in flux for several years. In fact, Kansas and Airbnb just announced a tax agreement on Jan. 16. Airbnb will now collect and remit sales and occupancy taxes to the state, according to a story by Christopher Brown in the Bloomberg BNA Daily Tax Report. Vermont also recently passed legislation requiring information reports from internet platform operators for short-term property rentals.

For those staying in the District, Airbnb collects and remits sales tax on rentals. In nearby Maryland, individuals who rent out their rooms or homes must collect and remit sales and use tax on their rental proceeds. Virginia, however, has not specifically addressed the sales tax implications of sharing economy supply models, so it is currently unclear whether Airbnb renters are required to remit taxes on their receipts there. Some counties in Virginia, such as the Washington-adjacent Arlington County, allow Airbnb rentals, but require “tourist homes” to collect occupancy taxes on such rentals.

Some visitors are booking their travel through online travel companies (“OTCs”). States vary in their treatment of the fees that OTCs charge to book using their services. While some include such fees in the tax base, other states exclude charges or markups from sales and use tax. For example, Washington includes any additional charges received by a room remarketer in their sales and use tax base. Maryland also imposes its sales and use tax on the full amount of consideration paid by a buyer. Conversely, if you’re looking to save a few dollars on your OTC booking, you can get a room in Northern Virginia where OTCs are not required to collect and remit sales tax on their service fees.

Whatever your politics and wherever you’re coming from, it’s clear that we can all agree that taxes are everywhere.

Continue the discussion on LinkedIn: Who should be liable for collecting sales and use taxes—facilitators like Airbnb or the owner of the property being rented?

For more information about state tax issues, sign up for a  free trial on Bloomberg BNA’s Premier State Tax Library.

By Emilie Burnette