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ALERT: Pennsylvania Department of Revenue Issues Notice to Users of Home-Sharing Services for Failure to Collect and Remit Taxes

June 14, 2016

As the summer is now upon us, renting your home to city visitors becomes more and more alluring through home-sharing internet site services like AirBnB and FlipKey. Users of these services should remember it is important to maintain adequate records, and to collect and remit occupancy taxes.  Recently, the Pennsylvania Department of Revenue sent upwards of 2,500 letters to property owners registered on home-sharing sites alerting them of their responsibility to pay hotel occupancy taxes.

The Department of Revenue defines a "Hotel" to include an apartment, hotel, motel, inn, guest house, bed and breakfast or other building (including personal residences) which is available to rent for overnight lodging or use of facility space to persons seeking temporary accommodations. [1]

Pennsylvania Law requires that any homeowner who rents out sleeping accommodations for more than 30 consecutive days, or for more than 180 days out of the year, must obtain a Sales, Use and Hotel Occupancy Tax License. People renting out their homes on a more short-term basis, however, are still required to collect and remit  Pennsylvania's 6% hotel  and occupancy tax, together with Philadelphia's 1% hotel occupancy  tax, to the Pennsylvania Department of Revenue and, if the property is located in Philadelphia, they  must also collect and remit Philadelphia's 8.5 %  hotel excise tax to the Philadelphia Department of Revenue, and  file the Philadelphia School Income Tax  Return or Business Income and Receipts Tax Return and Net Profits Tax Return and pay the attendant taxes due.  If Airbnb is used to facilitate your rental it will collect and remit the  hotel taxes on your behalf.

The IRS has a different standard for what constitutes a taxable event for short term home-rentals. Federal law provides that if you use your home for 15 or more days you must report the income on your federal income tax return. Conversely, if you rent your home for 14 days or less during the year, you do not have to report the rental income in your federal income tax return.

Our attorneys are equipped to ensure homeowners utilizing these services are complying with both federal and state law.  For more information, contact Gary Zlotnick at gazlotnick@zarwin.com or 215.569.2800.

[1] http://www.phila.gov/Revenue/businesses/taxes/Pages/HotelTax.aspx

 


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