Indiana is one of seven states where taxes on Airbnb bookings are not automatically handled. This has caused confusion among hosts, who aren’t always sure if they’re on the right side of the law — or even if there is one.
“It’s in my contract that I don’t have to (deal with taxes), so why would I?” said Rachel Prince, an Indianapolis-based Airbnb “superhost” and manager of other short-term rental owners, about her agreements with her guests. “There are a lot of gray areas and no one is really sure, so I think the exact procedure was a bit confusing for my clients and me.”
Bill would resolve confusion over state taxes on Airbnb
The reality is that an Indiana law is expected to come into effect on July 1 defines hosts of Airbnbs and other short-term rentals as merchants who must file a statement showing all taxes, such as a 7% tax that hotels and bed and breakfasts pay. But this law does not specify who must collect and remit these taxes.
A new bill before state lawmakers, however, would clarify that liability rests with hosts, but also allow Airbnb and other short-term rental platforms to collect and remit taxes electronically, eliminating a potential headache for hosts.
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Senate Bill 497, introduced by Senator Karen Tallian, would also stipulate that landlords working with Airbnb or similar services such as HomeAway or VRBO collect county innkeeper fees, if any.
The bill also exempts landlords who rent out rooms in their principal residence for less than 15 days per calendar year from paying the tax.
Tallian said the bill, which is now before the Indiana House Ways and Means Committee after the Senate passed it 35-14, follows previous efforts to regulate short-term rentals in Indiana. Last year, for example, the General Assembly passed a law prohibiting cities from banning short-term rentals altogether.
Tallian recently told a Senate committee that his bill, an upcoming proposed law amendment, would put all tax regulations for short-term housing rentals in one place so landlords know what taxes they must collect and remit to the State.
A level playing field with hotels and B&Bs
Clarity is just one reason for the bill, Tallian told IndyStar. The legislation also addresses the lack of parity in tax collection and remittances between owners of short-term rentals and traditional accommodation businesses like hotels and bed and breakfasts.
The senator said she introduced the bill after hearing from members of the latter groups and the Department of Revenue about short-term tenants not paying their share of sales taxes and innkeepers, despite profits from tax-funded tourist campaigns that bring people to Indiana. .
“It must be, as you know, a big business,” she said.
Airbnb announced in december that Indiana hosts in 2018 generated $36 million in additional revenue from its platform, booking 322,000 guests and doubling their annual revenue gains over the previous year.
Marion County recorded the largest share of these revenues, accounting for $14 million.
Real estate hosts of Airbnb’s rivals would also benefit
Tallian’s bill will remove Indiana from a small list of states — the others being Delaware, Georgia, Hawaii, Massachusetts, Nebraska and West Virginia — where Airbnb has no agreements taxes with local governments. It would also open the door to the same deals with HomeAway and its subsidiary VRBO, which also collect and remit lodging taxes in some areas, but not yet in Indiana.
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Current tenants say they would welcome such a change.
“The way I would do it is take it out of my gross income and apply it to taxes – just like I do with my other income,” said Prince, who runs his own Airbnb in Garfield Park in addition to his short-term rental property management business, Hosts of Indy LLC. “I would rather Airbnb take care of it for me. It would be so much easier.”
Airbnb’s current tax laws have caused confusion
David Rollings, another Indianapolis-based Airbnb host, said he currently does not collect or remit taxes generated from rental income generated from his Airbnb reservations.
“It’s not straightforward to collect this tax from customers who don’t plan to pay this tax after the fact,” said Rollings, who owns multiple properties. “At this time I am not collecting taxes at this time with the understanding that it is not the law to collect tax.”
Airbnb “superhost” Bethany Schultz and her wife, Kelly Weger, own three Airbnbs in Fountain Square and one in Fletcher Place.
Schultz said she reports the income they earn as income taxes and uses the money to maintain properties, pay a housekeeper and cover other Airbnb service costs.
“The short term fills a gap,” said Schultz, who also advertises the properties on TripAdvisor and Craigslist. “There are a lot of six-week interns. There are a lot of office rotations. There are a lot of six-week assignments in this city and it would be astronomical to stay in a hotel room.”
It’s unclear how much money states and local governments are missing in sales and county tax revenue from innkeepers.
“Because we currently have no information on the number of short-term renters, it is impossible to estimate how many counties could expect to receive short-term rentals,” said Emily Landis, communications director. from the Ministry of Revenue, in a press release. .
Call IndyStar reporter Alexandria Burris at 317-617-2690. Follow her on Twitter: @allyburris.
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