When a property owner lists and rents their property through a marketplace, such as Airbnb or VRBO, that marketplace is responsible for the collection and remittance of all applicable hotel and motel taxes. The sales price includes all fees the marketplace directly charges the customer for facilitating the rental.
Example: Bob owns a cabin in Iowa that he lists for rent on BNB Mania, an online lodging rental marketplace. Bob offers the cabin for rent for a three-day weekend for $900. When listing the cabin, Bob also requires customers to pay a $20 towel fee and a $50 cleaning fee on top of the base $900 rental fee. BNB Mania also imposes a $30 service charge on the customers for processing the transaction.
- A customer reserves and pays for renting Bob’s cabin using BNB Mania. The total sales price is $1,000:
- $900 - Lake home rental
- $20 - Towel fee
- $50 - Cleaning fee
- $30 - Service charge
- Bob’s cabin is located in a jurisdiction that imposes a 7 percent local hotel and motel tax. BNB Mania must charge the customer $1,120:
- $1000 - Sales price of the rental ($900 + $20 + $50 + $30)
- $50 - State hotel and motel tax (5% of sales price)
- $70 - Local hotel and motel tax (7% of sales price)
BNB Mania must add the $50 state-imposed tax as separate and apart from the sales price and separate and apart from the locally imposed tax, and add the $70 locally imposed tax as separate and apart from the sales price and separate and apart from the state-imposed tax. BNB Mania must then remit the $120 in tax to the Department.
If a property owner only makes rentals through such lodging rental marketplaces, the property owner does not need to collect hotel and motel taxes or file returns. However, if a property owner makes some rentals on a marketplace and some rentals directly to customers not through a marketplace, then the property owner must collect and remit all applicable hotel and motel taxes for those direct rentals not made through a marketplace.