Denver Airbnb hosts: How are you collecting Lodger’s Tax?

Question

I'm sure this is made to be a big pain in the neck by design, but I want to comply and am not seeing a straightforward way to collect Denver's Lodger’s Tax in Airbnb. Denver rules state "The Lodger’s Tax rate of 10.75% is based on the total amount charged for the lodging, which includes any fees or charges that are required in order to obtain the lodging. Lodger’s Tax is to be collected at the time of sale, regardless of when the lodging occurs."

Okay, so we need to collect "at the time of sale," however, I see no place within Airbnb to charge for nor collect this. Am I completely missing this step somewhere? I see that Airbnb collects and remits occupancy taxes, which is great, but how about Lodger’s Tax? Any help is greatly appreciated!

James Carlson · Answer

@Jason Henning

I think as @Tyler Work and @Linda Weygant were saying, you can just bake it in. But I also know hosts who ask for it separately. Doing so -- as with so much with your Airbnb -- is just about setting proper expectations. You explicitly say it in your listing. Maybe put it in all caps. You would also notify them of it during your initial communication with them.

The city of Denver has been saying they are "close" on this for months. What's difficult is that they have to change their tax codes to allow this. Currently, the code prohibits people or entities from collecting tax on someone else's behalf. And that's essentially what Airbnb would be doing. Once they change their tax code to allow this collection, then they need to get Airbnb on board to actually do it. (Sidenote: it can't be that hard. Airbnb collects the lodger's tax down for hosts down in Colorado Springs.)

Linda Weygant · Answer

I had not seen anything special with regard to these taxes.  For regular sales tax, you've always been allowed to bake the sales tax in, but you've always had to disclose that to the public when you're vending.  ie - T-shirts, $25 (includes sales tax)

Which is why I suggested putting it on your ad.

Linda Weygant · Answer

This is an acceptable method for collecting the tax, by the way.  I would state somewhere in your add that "all rates are inclusive of Colorado/Denver blah blah blah whatever"

So say you charge $100/per night.  When you go to report that, if you report $100.00 as income, then you're paying $10.75 in tax.  But if you do the math and take your $100 and state that that includes the tax, then the amount of income is $100 / 1.1075 or $90.29 in revenue and $9.71 in taxes.  That way you're not technically out the money.  Also use the $90.29 figure to report your income tax too, for lower taxes.  Perfectly legit.

If you've already filed your prior returns reporting $100.00 and paying $10.75, you can amend for a credit/refund if you submit amendments with a letter of explanation.

Tyler Work · Answer

@Jason Henning I spoke with someone on the STRAC (short term rental advisory committee) earlier today and they said Airbnb is collecting tax "soon", whatever that means.

In the meantime - hosts have been using the Resolution Center to collect tax after they book.  The 10.75% is calculated based on your booking rate + cleaning fees or any other fees required to "secure the booking".

I've found that guests think you are scamming them when you go to collect so I'm paying the tax out of pocket and counting down the minutes until Airbnb can start collecting and remitting on behalf of the city.

Jason Henning · Answer

@James Carlson

Ah interesting, so the state allows entities to collect tax on someone else's behalf, just not yet Denver.  Well in any case, I second your previous Sidenote... "it can't be that hard. Airbnb collects the lodger's tax for hosts down in Colorado Springs."

James Carlson · Answer

@Jason Henning

Yeah, Airbnb uses the "occupancy tax" line item as a catch-all. In a place like Colorado Springs, that line does in fact include the lodger's tax, in addition to some local and state sales taxes.

In Denver, the "occupancy tax" is just the state sales taxes that Airbnb has agreed to collect for the hosts and remit to the state. If you're a fiend for tax-remittance talk -- and who the hell isn't?!

Tyler Work · Answer

@Linda Weygant I used to remit this way but was told by city that this was not allowed.  They used to have a document online explicitly stating not to "bake the taxes into your rate" but have since taken it down.  You probably know better than me but I did find this online for those trying to make a science project out of this:

https://www.denvergov.org/content/dam/denvergov/Portals/571/documents/TaxGuide/Short_Term_Lodging_Rentals_at_Primary_Residence.pdf

Andrew Wong · Answer

Just increase your rate accordingly to encompass that tax.

Jason Henning · Answer

Ah, @Tyler Work, clarity. Thank you Sir!  I may follow your playbook because, yes, it feels like you're walking them out of the store and into the alley to ask for side cash.  Well, hopefully it'll be in place, as they say, "soon."  Thanks again!

Bill S. · Answer

@James Carlson I thought you mentioned that the City was working to get this ironed out. Perhaps @Tyler Work knows something as well.

Denver Airbnb hosts: How are you collecting Lodger’s Tax?

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