Changes in tax laws will affect vacation rentals
diamondcpas
April 3, 2019

Thinking of booking a room or an entire home for a vacation or business travel in Pennsylvania this year? Be prepared for a bump in the cost.

As of January 22, 2019, the state has closed a tax loophole that previously allowed online home-sharing sites such as HomeAway, VRBO (Vacation Rental By Owner) and Expedia to not pay the 6 percent hotel occupancy tax that traditional hotels and motels are required to pay.

According to the Pennsylvania Department of Revenue, the booking agent is now required to remit the tax when renting out a property, whether it’s a room, house, or apartment, to a guest for fewer than 30 days.

Under the new regulations, the hotel occupancy tax has been expanded to include the “accommodation fee,” which is the amount charged by the booking agent that exceeds the amount the operator or homeowner earns.  One of the largest online home sharing sites, Airbnb, has been proactively collecting the tax in Pennsylvania since 2016.

Beginning this year, the State Department of Revenue is also requiring booking agents to have two licenses to collect the hotel occupancy tax. In addition to the booking agent license, a sales, use and hotel occupancy license is also needed. The additional license is needed because the taxes collected on the accommodation fee do not go into the Commonwealth’s general fund, but rather are designated for the Tourism Promotion Fund, which hasn’t seen revenue in years, said state officials.

The expanded application of the hotel occupancy tax, Department of Revenue officials explain, is in the interest of creating “a level playing field” for all those doing business in the state.

The changes will have no effect on the traditional hotel community, which already pays the taxes.

It’s estimated that Pennsylvania missed an opportunity to collect approximately $24 million as a result of not imposing the tax on online home sharing sites and business agents working with out-of-state companies.

The 6 percent hotel occupancy tax (plus the 1 percent local tax charged in Allegheny and Philadelphia counties) is separate from the local hotel occupancy tax administered by local taxing jurisdictions across the state.

Under Act 109 of 2018, booking agents must collect, report and pay directly to their local taxing authorities.

Filing dates for booking agents follow the same due dates for the sales, use and hotel occupancy tax. The dates are updated yearly.

To learn more about the hotel occupancy tax, visit the Pennsylvania Department of Revenue’s website.

 

 

 

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