“Home sharing” refers to the rental of houses, condos, or apartments to short-term guests. This has become a popular way for owners and tenants (“operators”) to earn extra income across the United States. Short Term Residential Rentals typically occur through online home-sharing platforms, such as Airbnb, craigslist, Expedia, FlipKey, HomeAway, TripAdvisor, and VRBO.
Home sharing is generally subject to the same taxation as hotels and other businesses. Nationwide, many localities are working to ensure that all taxes are assessed and collected fairly. This involves identifying properties involved in home sharing and collecting taxes due. It’s difficult to determine the amount of home sharing because estimates of the number of short-term rental properties in Alexandria vary widely.
Short Term Residential Registry
If you operate one or more short term residential rentals in the City, you must complete this free registration process.
Voluntary Collection Agreement
The City has entered into an agreement with home sharing platform Airbnb to collect the Transient Lodging Tax from short-term residential rentals and remit those payments to the City. The Transient Lodging Tax is often commonly referred to as the “Hotel” tax, but equally applies to home-sharing rentals.
Though Airbnb offers such a tax collection service in many other states, Alexandria is the first locality in Virginia to enter into this type of agreement, which takes effect in April. The partnership will ensure the Transient Lodging Tax is collected from each renter at the time of reservation through the Airbnb platform. This agreement is expected to significantly reduce the workload for rental owners and City staff, and vastly simplify the reporting and payment process for most home-sharing residents.
This agreement is only with Airbnb, and the City reminds home-sharing operators using other platforms that they continue to be responsible for collecting and remitting the Transient Lodging Tax directly to the City. Questions about remitting Transient Lodging Tax payments should be directed to firstname.lastname@example.org, or 703.746.4800.
In November 2017, City Council adopted a recommendation from City staff on how to register and collect taxes from Short-Term Residential Rentals in Alexandria, pursuant to a new state law that took effect in 2017. Prior to adoption, the City hosted a community meeting to gather input on October 17.
- Short-term rental properties are already subject to the following taxes:
- State and local Sales Taxes totaling 6% must be collected from the renter and remitted by the operator to the Virginia Department of Taxation.
- Regional and local Transient Lodging Taxes of 8.5% plus $1 per room per night must be collected from the renter and remitted by the operator to the City of Alexandria for any rental that can lodge four or more persons at any one time .
- Staff is considering a proposal to City Council to amend the ordinance by removing this reference. This would promote equity between short-term rentals of various sizes.
- The operator must obtain a Business, Professional and Occupational License (BPOL) if their gross revenue is greater than $10,000 annually, and they rent more than four separate dwelling units (each having cooking facilities). A BPOL license is only required if they meet these two conditions.
- Short-term rental properties do not require zoning or permitting approvals solely on that basis, but any normal zoning or permitting provisions (e.g. maximum occupancy, construction permits) would still apply.
Improving Efficiency for Taxpayers and the City
- Airbnb appears to comprise 70 to 80 percent of the short-term rental market in Alexandria. The City is exploring with Airbnb a voluntary agreement whereby Airbnb would collect the Transient Lodging Tax as part of the rental payment process and remit it to the City. This would ensure that the tax is paid without requiring the operator to take any other action, and would reduce City staff time to obtain and process tax returns. However, Airbnb has indicated that it will not disclose the identity, location or amounts by operators’ names or addresses, and will not allow the City to audit Airbnb records more frequently than once every four years, or audit by name or address. Staff can audit individual operators based on the new registry.
- For non-Airbnb properties, there are third-party companies that can help the City identify potential short-term rental properties for a fee paid by the City. This could provide a cross-check to help ensure all operators are complying with the registration process. Although resulting tax revenue would be expected to exceed the fee,
there would still be a cost involved for City staff to conduct collection activity using the data. The third-party data also typically has difficulty identifying individual condominium units. Thus, the new registry option remains an important consideration to ensure fair tax assessment and collection.
New State Law
The new law ( § 15.2-983) allows a locality to adopt an ordinance to establish a local registry of short-term rental properties as follows:
- Registration is administrative in nature. The law does not change any existing tax or zoning requirements, condo or lease provisions, homeowner association restrictions, or other agreements or rules.
- Registration is annual and requires the operator’s name and the address of each property.
- The locality may charge a reasonable fee to administer the registry, if it deems necessary.
- The locality may assess a penalty of up to $500 per violation for failure to register, and may prohibit the rental of a property that has not registered or paid registry fees or penalties. Repeated violations may result in the prohibition on rental of applicable properties.
- The state law defines “short-term rental” as “the provision of a room or space that is suitable or intended for occupancy for dwelling, sleeping, or lodging purposes, for a period of fewer than 30 consecutive days, in exchange for a charge for the occupancy,” and defines “operator” as “the proprietor of any dwelling, lodging, or sleeping accommodations offered as a short-term rental, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee, or any other possessory capacity.”
- The registry would not apply to real estate agents, properties represented by real estate agents, registered time-shares, or licensed lodging establishments such as hotels.