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5323 Views 19 Replies Latest reply: Jun 3, 2012 11:18 AM by k.rigganforce RSS
New Member 9 posts since
Apr 27, 2011
Currently Being Moderated

May 18, 2012 2:15 PM

Paying Taxes

I just got off the phone with a potential renter who insisted we give her our property tax free, I explained that we had already discounted and we have to pay Hawaii state taxes, therefore we have to pass the tax on to them. She told me other owners would rent to her without her paying tax. Is this an issue for anyone else? I'm feeling like we dodged a bullet.

  • msdebj Senior Contributor 1,357 posts since
    May 25, 2011
    Currently Being Moderated
    May 15, 2012 1:04 PM (in response to jane300)
    Re: Paying Taxes

    Jane, yes, I think you dodged a bullet. And with the current legislative issues concerning VR renters and tax collection in HI this could have been a "fishing" expedition for the writers of the proposed legislation. They could be attempting to gather information and then say "See? These owners aren't paying their taxes" Or, not collecting them. It'd hard for them to prove you didn't pay the taxes out of your own pocket though, IMHO.

     

    I'd never want a guest who'd insist I break the law. Period.

    Debj

  • anja Senior Contributor 1,555 posts since
    Aug 9, 2011
    Currently Being Moderated
    May 15, 2012 4:34 PM (in response to jane300)
    Re: Paying Taxes

    Bravo to you for standing your ground. I,too, believe that you did, indeed, dodge a bullet...perhaps from more than one direction.

     

    I, too, am a rental owner in the State of  Hawaii. There has been so much VR strife in Hawaii State for years around the VR trade...and msdebj raised a good point. The inquiry could have been a "test", although I haven't heard of any such cases outright...but the current time is definitely ripe for such covert actions to take place. There have been resentful residents, neighbor groups, property managers, real estate agencies, vacation rental agents for years against the private VR owner -- especially aimed against the owners who do not live  in the location of their VR rental.  And, the recent legislation, which is supposedly about non-compliance of VR tax, is a reality {it's on the Hawaii Governor's desk after months of drafting and debate}. So, a local "sting" operation would not shock me, at this point, but I'm thinking more that your inquirer was more likely someone looking for a low price.

     

    To answer your question:  in all the years of doing business here, no one has ever asked me to waive charging them Hawaii State tax or the Transient Vacation Rental tax --- to lower their total price. So, that has not been an issue for me.

     

    If it were suggested, I would end the conversation. I would never waive charging anyone taxes for any reason to help them get a cheaper deal-- ---that is an introduction to "trouble" for the owner from the 'get-go' --- and I abhore that mindset, anyway.  {People need to be looking at "cheaper" places that they -can- afford.}  So, I consider that a red flag which suggests a mentality of the person which I avoid in my home. I think that your inquirer's "insisting" is respectless towards you....she suggests {to me} a lower standard of "guest" who might have less respect in general {for your home}  and especially for tax laws {a cheater mentality} at worst...or just someone believeing that others {like you} should shoulder the tax burdens -- while they enjoy the benefit of a cheap deal. And, I don't like her mentality because she tried to manipulate you claiming that other owners would do this for her.  {Then, she should seek other offers, if such ever existed.}  I am not in favor of anyone who tries to use me {or anyone else} to avoid paying their share of taxes. That's not a 'deal maker' in my book.

     

    Having said that, I once followed another thread in which some owners stated that they preferred to quote a total price...they do not itemize charges, such as taxes. Their total quote includes items such as taxes, cleaning and other fees.  So, as msdebj stated, not itemizing taxes in a quote does NOT mean that the owner isn't paying the taxes.

    • sodamo Contributor 260 posts since
      Nov 5, 2011
      Currently Being Moderated
      May 15, 2012 9:50 PM (in response to anja)
      Re: Paying Taxes

      Kudos to you :)

      I just went through this myself a couple days ago.

      I got a call from my neighbor saying she had an inquiry for a 3 month rental starting next Dec,, but the woman made an offer that was just too low for her to accept, but she thought of me and asked if I'd like the referral. I thought quickly and said yes. The difference between is my neighbor has a single VR while I have 3 co-located units. One of my units is very comparable to hers, pluses and minuses both ways.

      The woman called within half and hour and off we went. I told her i could rent at the price quoted my neighbor  So after half a dozen emails of questions and answers and a dozen or so new photos I specifically took and emailed I received an email with an offer more than 20% lower plus this new offer included taxes, meaning it was really 30% lower. Of course, I responded I couldn't do that. Her response was that the previous offer had also been tax inclusive - a total surprise to me!!!  I politely told her that I would never have agreed to tax inclusive without a detailed discussion. I also provided her a synopsis of the recent Hi GE/TAT legislation. I said, my invoices always include the breakout of taxes and suggested she request the same from the other property that was willing to rent at her lower offer.  I talked with my neighbor and we both agree we likely dodged a bad one.

      With our Hi taxes as high as they are, over 13%, I can understand people's concern. I guess one thing that really irked me was was how much their rental car was costing per month, which if I had absorbed the GE/TAT was less than $50 from what she thought my VR was worth.  Sorry for venting, but I think we need to be totally above board tax wise.

       

      David

      David

      • anja Senior Contributor 1,555 posts since
        Aug 9, 2011
        Currently Being Moderated
        May 16, 2012 5:44 PM (in response to sodamo)
        Re: Paying Taxes

        It's good to vent!   We learn from venting and rants, as well.   See my other post, below, in response to harborfields.  The VR strife is another reason for owners across the USA to respect the law.

    • harborfields Contributor 207 posts since
      Jul 12, 2011
      Currently Being Moderated
      May 16, 2012 6:01 AM (in response to anja)
      Re: Paying Taxes

      anja wrote:

       

      Having said that, I once followed another thread in which some owners stated that they preferred to quote a total price...they do not itemize charges, such as taxes. Their total quote includes items such as taxes, cleaning and other fees.  So, as msdebj stated, not itemizing taxes in a quote does NOT mean that the owner isn't paying the taxes.

      Everyone should be sure to check the laws in their own jurisdiction -- while it is not universal, some states require that the tax amount be listed separately and not included in a single lump sum amount.

      • anja Senior Contributor 1,555 posts since
        Aug 9, 2011
        Currently Being Moderated
        May 16, 2012 5:42 PM (in response to harborfields)
        Re: Paying Taxes

        I totally agree, harborfields!

         

        A while back, I participated in a thread in the "Traveller Community" on this Forum where it was debated whether to use a "total quote"  or an "itemized quote".  Some owners and travellers preferred the 'total quote". I itemize to show the taxes.  The others didn't see the relevance in detailing the taxes, they debated. Personally,  I can only see the relevance in informing people of how I arrived at my total price I offer.  But, I think it's more than a personal choice....I think people should check their local laws, as you've stated.

         

        Also, I became aware early on after starting my VR that  much of the local resentment in my State which fueled rental strife and legal actions against VRs, was because people who oppose VRs believe that owners do not pay taxes to the State.  I read all the "press" here and people  who hated the VRs actually searched online to find VR advertisements and pointed to the "total quotes" used ....suggesting that as evidence on non-compliance of taxes... because some owners did not itemize the taxes in their ads.  Owners do not have to itemize the taxes ...but I think they should. It is often misunderstood by the "opposition".

         

        We have to stay on top of this VR strife that is sweeping across the USA  --- in my opinion, owners need to be transparent in price policy, tax policy, contracts, etc..  It's up to us.

        • stjvilla Active Contributor 624 posts since
          May 27, 2011
          Currently Being Moderated
          May 16, 2012 5:54 PM (in response to anja)
          Re: Paying Taxes

          Good points, anja.  We always quote first the rental and then the tax, then a total amount because the tax is a fixed 10% of the rental and sometimes later they inquire about adding or subtracting a day and that changes the tax too and therefore the total.  Transparency and honesty on all sides!

  • wiffle Contributor 217 posts since
    Feb 23, 2011
    Currently Being Moderated
    May 16, 2012 5:56 PM (in response to jane300)
    Re: Paying Taxes

    I think it is important to break out the taxes on your rental agreement. If you want to make a deal to an agreed upon price, I think it is a good idea to do the backward math so that the agreement states the taxes that you pay.

     

    I think many of us compete with tax scofflaws. Those people make me sick, especially those who don't live in the area or even the state, and don't care that the town/state really does need the tax money.

    • harborfields Contributor 207 posts since
      Jul 12, 2011
      Currently Being Moderated
      May 16, 2012 7:00 PM (in response to wiffle)
      Re: Paying Taxes

      wiffle wrote:

       

      I think it is important to break out the taxes on your rental agreement. If you want to make a deal to an agreed upon price, I think it is a good idea to do the backward math so that the agreement states the taxes that you pay.

      You've got to do the math sooner or later anyways, since you will need to figure out how much you're supposed to pay to the tax revenue collectors...

  • New Member 7 posts since
    May 11, 2012
    Currently Being Moderated
    Jun 1, 2012 11:28 AM (in response to jane300)
    Re: Paying Taxes

    European Law requires renters to quote an all inclusive price including taxes if your quoteing to a EU citizen irrespective of where your property is.

    • anja Senior Contributor 1,555 posts since
      Aug 9, 2011
      Currently Being Moderated
      Jun 2, 2012 4:01 PM (in response to juliesvillas)
      Re: Paying Taxes

      I get many guests from EU and some have told me that they appreciated getting the full breakdown of the costs - once we got to meet and talk when they checked in.  I lived overseas in Europe for many years so I was aware that travelers from the EU would expect to see all the charges.  Anyway, when I relocated to the US, the State I live in has this as common practice among  owners to break out the rate, taxes, and any fees that are being charged. 

       

      Frankly, it just makes sense to me to tell people how I arrived at the total. 

  • sapphiresteve Active Contributor 505 posts since
    Dec 16, 2010
    Currently Being Moderated
    Jun 1, 2012 11:29 AM (in response to jane300)
    Re: Paying Taxes

    At hotels, the tax(s) are not listed until you get your bill. On most of the items that we buy, the tax is not displayed until it is "rung up" at the register.

     

    Nonetheless, we all know that "it's coming".

     

    I try to make it as clear as possible, how much of the "Grand Total" is for tax

     

    I quote a total rental rate and then add "plus X% XX tax".

     

    On the rental agreement, I itemize the tax, but let the guest do the addition.

  • Contributor 76 posts since
    Mar 30, 2011
    Currently Being Moderated
    Jun 1, 2012 11:49 AM (in response to jane300)
    Re: Paying Taxes

    First I want to commend Anja on her answer.  Well done!  We have owned & operated a rental unit in Hawaii for 11 years.  It's getting harder and harder to do business there as the state is becoming less and less Aloha.  In our quotes we always detail how much the rental fee is, the cleaning fee, the GET, the TAT and the grand total.  Only after the quote is accepted do we continue with the booking procedure.  I use the quote as my hardcopy for completing the credit card processing because according to the State of HI regulations everyone has to show how much tax was paid on that transaction whether it be a deposit or a final payment.  It can't be a total but it must be broken down as a GET amount and a TAT amount.  For instance for short term stays we charge a $200 deposit.  On the notation section on the form we use as a receipt I will type GE Tax paid $7.34; TA Tax paid $16.31.  Then I'll continue with how much is due before their arrival and on what date.  If we're ever audited we will be in total compliance.

     

    I have been approached by locals about our unit and the tax issue.  I explain we pay our taxes.  I also tell them that if we lived in the unit full-time we would enjoy only paying $60/year in property taxes like they do instead of paying thousands every year being an out-of-stater.  They do not like being reminded that as a Hawaii resident they're getting a very cheap deal and it's the haole who pays through the nose.

    • anja Senior Contributor 1,555 posts since
      Aug 9, 2011
      Currently Being Moderated
      Jun 2, 2012 10:37 PM (in response to k.rigganforce)
      Re: Paying Taxes

      Hi k.rigganforce,

       

      I have been doing as you do... I itemize the taxes so people can see the GE and the TA.   It's the only way that makes sense to me...and it's what is correct for us in our State.

       

      About "government bans", did you happen to see my earlier post...about HA's  press release? 

       

       

      http://community.homeaway.com/message/23878#23878

      • Contributor 76 posts since
        Mar 30, 2011
        Currently Being Moderated
        Jun 2, 2012 7:44 PM (in response to anja)
        Re: Paying Taxes

        Hi Anja;

         

        No, I hadn't read the article.  Thanks for sharing.  I haven't been on here much latlely.  I certainly hope all goes well with him and he's able to promote VRBO in a good light.  There are a lot of sites to choose from these days and it's difficult to know which ones to advertise with.  Which island are you on?

    • lahainarental Contributor 76 posts since
      Mar 22, 2012
      Currently Being Moderated
      Jun 1, 2012 8:55 PM (in response to k.rigganforce)
      Re: Paying Taxes

      Hi k.rigganforce,

       

      We also have a rental in hawaii and have been dilligently collecting our taxes(havent paid them yet since we have only owned the unit for one month and we pay taxes quarterly. I have been breaking down our quotes in the rental agreement as follows :

       

      Rental Rate

       

      Cleaning Fee

       

      Discount

       

      Taxes (13.42%)

       

      Refundable Security Deposit

       

      Total:

      Are you saying we should be breaking out the taxes for GE and TA as two seperate lines?

       

      Thank you,

      • Contributor 76 posts since
        Mar 30, 2011
        Currently Being Moderated
        Jun 2, 2012 7:36 PM (in response to lahainarental)
        Re: Paying Taxes

        Hi Lahainarental;

         

        You can write your quote however you choose.  What I'm saying is when you accept payment and issue a receipt, whether it be a credit card, check, etc., you must break out the payment to show how much tax is actually paid.  For instance, if your total rent is $1,000, your cleaning fee is $80 then the total would be $1,080.00.  If you have a security deposit of $500 then the total is $1,580.00. You have to figure out how much of that payment is GET and TAT and show it on the receipt.  It might look something like this (Sorry it's not perfectly aligned):

         

        Total Rent Due:      1,000.00

        Cleaning Fee          80.00

        Security Deposit     500.00

        Subtotal               1,580.00

        GE Tax @4%          63.00

        TA Tax @9.42%     148.00

        TOTAL DUE:         $2,871.00

         

        If you charge your security deposit separately, then you would do something like this:

         

        $440.88     Deposit amount

        $18.34     GET

        $40.78     TAT

        $500.00     Total Amount Due

         

        Does that make sense?

        • sodamo Contributor 260 posts since
          Nov 5, 2011
          Currently Being Moderated
          Jun 2, 2012 7:46 PM (in response to k.rigganforce)
          Re: Paying Taxes

          Perhaps I'm misunderstanding your first example.

           

          You charge GE/TAT on the security deposit?. I can see doing so IF you ended up keeping it for whatever reason, but if returned, that is complicated bookkeeping in my mind as if returned there is no tax due and also have to be refunded. Do you break it out this way when filing?

           

          David

           

          Sent from my iPad (3rd Gen) with Aloha

          Please visit vacation.ninolehawaii.com

          • Contributor 76 posts since
            Mar 30, 2011
            Currently Being Moderated
            Jun 3, 2012 11:18 AM (in response to sodamo)
            Re: Paying Taxes

            If a guest pays for everything in one payment and the security deposit is not a separate transaction it's my understanding a tax has to be paid on it.  It's income as you don't know if it'll be returned or not.  If my example is incorrect I apologize and perhaps you could give lahainarental a corrected version?  We don't charge an extra security deposit.  We keep the guest's credit card on file for 30 days in case of damages, etc.  So far that's worked out great. 

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