Airbnb Collecting Taxes for Virgin Islands

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What jumps out at the person looking at the Airbnb website for the U.S. Virgin Islands is how inexpensive accommodations can be. What one doesn’t see is the added costs of local taxes.

This could be a problem, according to Kathy Tiddard, owner Caribbean Breeze Apartments and Vacation Homes. She told the Source she had always built the tax into the advertised price of her rooms, but that option has disappeared with the government agreement earlier this year mandating that Airbnb collect all the taxes for the bookings it makes in the U.S. Virgin Islands.

She said the new procedure is making some Virgin Islands residents who rent rooms through Airbnb consider leaving the online marketplace and hospitality service.

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She is also concerned about where the money – the 12.5 per cent Hotel Room Occupancy Tax Airbnb collects on behalf of hosts and then remits to the Territory’s Bureau of Internal Revenue – is going and how it is accounted for.

She is worried that, when Airbnb pays taxes collected on her behalf, it will be in a lump sum payment including all Airbnb customers and won’t be recorded as paid by her and she will be responsible to pay again at the end of the year.

Marvin Pickering, director of the Virgin Islands Internal revenue Bureau, said Monday, “We are pretty confident that we will know what businesses are paying the taxes.”

He said that when Airbnb makes a payment, it will be broken down into sums for each business. He added that the government has the ability to audit what Airbnb is doing.

He expects the first payment from Airbnb before the end of this month and payments to be made on a monthly basis in the future.

Tiddard also has an issue with Gov. Kenneth E. Mapp touting the new program as a way to help heal the present budget crisis. She pointed out that all these taxes will go to the Department of Tourism. When the agreement was signed in April, a press release from the governor’s office said, “The agreement with Airbnb is a component of the Mapp-Potter Administration’s Five Year Plan to fully restore economic stability to the V.I. Government through economic growth, increased revenue collection and better resource management.”

Virgin Islands senators also had expectations inflated of what would happen with the implementation of this agreement and more like it.

Pickering said this week that the government will pursue similar agreements with other travel organizations that offer accommodations such as Expedia, HomeAway and VRBO.

In 2012, St. Thomas real estate management company owner Kirk Boeger testified to a Senate committee about this problem, describing how properties were advertised online without any mention of hotel taxes in their billing. He said he “would not be surprised if the V.I. is missing collections for upwards of $20 million per year from hotel tax alone.”

The Source’s Bill Kossler analyzed that figure and wrote, “The only way the estimate could be accurate would be if most people who visited the U.S. Virgin Islands stayed in villas rather than hotels, and there is no evidence that this is so.”

Christopher Swanson, who along with Jeff Printz owns The Fred, a new hotel with 22 rooms that will open in Frederiksted before the end of the year, is happy with the new agreement. Swanson and Printz also have four apartments at Liberty Place they rent through Airbnb. He told the Source he is glad that Airbnb is now collecting the tax. He said, “It makes it a level playing field for all of us.”

He added that he has always collected the tax, but unlike Tiddard he did not incorporate it in the price. He tacked it on at the end. He said, “People don’t like taxes, but they are used to them.”

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