Vacation rental property owners targeted for missing tax payments
By John P. Anderson
I have a small cottage that I rent out to visitors via the vacation rental website Airbnb. The cottage is on the same property as my home and I did not think that vacation rental taxes in San Diego applied to my situation.
The taxes in San Diego for vacation rentals are the transient occupancy tax (TOT) and tourism marketing district (TMD) assessment. The rates for a property like mine from these taxes total 11.05% of gross rent – 10.5% TOT and .55% TMD, there is also a higher 1.45% TMD rate that applies to lodging businesses with 30 or more units.
Voice of San Diego contacted me in regard to vacation rental taxes and in April ran a story that detailed the issue and showed I was liable for TOT and TMD. At that time I went back and paid the taxes due, plus penalties and interest, from the time I had started renting the cottage – about a year total.
Since the article ran I’ve been contacted by a number of Airbnb hosts in San Diego with questions about my experience, the taxes, etc. Until this week the questions were general ones and people being proactive about making sure they were doing things right. This week I received a call of a different nature – a gentleman had received a letter from the city informing him he owed $15,000 in TOT and TMD for the past 3 years. He was informed that the city now has a task force that is seeking out delinquent rental hosts.
To whom do the TOT and TMD apply? Per the city TOT FAQs, it applies to “any person that rents any structure or any portion of any structure for less than one month.” Essentially, if you are renting a room, a house, a couch, or a bed for a day (or even an hour) you need to pay TOT and TMD.
If you are renting property for a month or more these taxes aren’t required to be paid. These taxes need to be paid each month and before you can pay you’ll need to register with the city to receive a Transient Occupancy Registration Certificate which includes a unique ID number for your property. The payment of the taxes is due one month after a month ends (example: October TOT and TMD are due December 1).
Note that TOT and TMD are different than the Rental Unit Business Tax (RUB). The RUB is a $50 annual tax, plus $5 for each unit, that is assessed on rental property in San Diego. Information regarding the RUB is typically sent out with property tax bills. There are some exemptions from the RUB, which can be found here.
In addition to the TOT, TMD, and RUB, state and federal income taxes should be paid on the income derived from rental property. Airbnb issues hosts a 1099 at year-end which summarizes the gross rental income by property.
If you have questions about TOT or TMD you can contact the TOT/TMD Administration at (619) 236-6647or sdtot@sandiego.gov. This administration also advises you to report your neighbors via these contact methods if you “don’t think they are collecting/remitting the TOT and TMD assessment.”
I don’t have a problem with paying the taxes I owe and from those that have contacted me with vacation rental questions that seems to be the general mindset. For most I think there is confusion about what taxes they may owe and how to go about registering and paying them. A few suggestions I have for the TOT/TMD Administration to improve compliance follow.
- Include information about TOT and TMD with property tax bills, as is done with the RUB tax
- Allow users of online payment for TOT and TMD to create a profile and save information regarding address, contact information, bank information, etc. instead of requiring manual entry of all data for each payment.
For those that manage or own vacation rentals I hope this summary is helpful – please feel free to contact me if I can be of help to you.
John P. Anderson
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Mr. Anderson – Thank you for your suggestions and taking the time to write this article. The Office of the City Treasurer is committed to educating property owners on the Municipal Code requirements surrounding short-term vacation rentals within the City of San Diego. As part of our ongoing outreach, our office will be sending out a “Did You Know” insert in the January 2015 Rental Unit Business Tax billing statements. Gail Granewich, City Treasurer
Gail – Thank you! Both for the comment and for the information about the insert. I’m happy to do my part to help make our city a little better, despite my embarrassment of being incorrect to start with.
I used to face the same issues with my vacation rental until I started using this small company called Hotspot Tax. They do great work and are worth checking out for anybody dealing with these kinds of taxes.