19 Replies Latest reply: Jun 3, 2012 11:18 AM by k.rigganforce RSS

    Paying Taxes

    New Member

      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.

        • Re: Paying Taxes
          msdebj Senior Contributor

          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

          • Re: Paying Taxes
            anja Senior Contributor

            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.

              • Re: Paying Taxes
                sodamo Contributor

                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

                  • Re: Paying Taxes
                    anja Senior Contributor

                    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.

                  • Re: Paying Taxes
                    harborfields Contributor

                    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.

                      • Re: Paying Taxes
                        anja Senior Contributor

                        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.

                          • Re: Paying Taxes
                            stjvilla Active Contributor

                            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!

                      • Re: Paying Taxes
                        wiffle Contributor

                        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.

                          • Re: Paying Taxes
                            harborfields Contributor

                            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...

                          • Re: Paying Taxes
                            New Member

                            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.

                              • Re: Paying Taxes
                                anja Senior Contributor

                                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. 

                              • Re: Paying Taxes
                                sapphiresteve Active Contributor

                                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.

                                • Re: Paying Taxes
                                  Contributor

                                  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.

                                    • Re: Paying Taxes
                                      anja Senior Contributor

                                      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

                                        • Re: Paying Taxes
                                          Contributor

                                          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?

                                        • Re: Paying Taxes
                                          lahainarental Contributor

                                          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,

                                            • Re: Paying Taxes
                                              Contributor

                                              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?

                                                • Re: Paying Taxes
                                                  sodamo Contributor

                                                  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

                                                    • Re: Paying Taxes
                                                      Contributor

                                                      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.