To configure taxes, you first need to collect full details of all the relevant tax requirements information.
💡 Recommendation
Remit taxes yourself if at all possible. If you have the choice for the channel to remit taxes on your behalf, or for you to remit taxes yourself (like in the case of Airbnb where they allow custom taxes in your area), then choose to remit all the taxes yourself.
This can seem like more work, but it actually ends up with less work - you have to remit taxes for bookings from other channels anyway, and come audit time, you'll have to combine and document both. So doing all bookings the same will end up simplifying matters.
Once you've collected the information about what taxes are due, you can configure them in OwnerRez. It is important to configure each taxing authority separately -- for example, create one 7% State tax and a separate 3% City tax. Don't create one combined 10% City and State tax. If you combine them, you won't be able to separately apply criteria to them like whether different channels remit the tax. Even if both taxes are treated the same now, this may change in the future.
Here is a list of possible scenarios with steps to configure each one:
- Tax remitted for all bookings, regardless of channel
- Tax remitted for some properties and not others
- Tax for stays under 30 nights and not for longer stays
- Tax remitted for Vrbo bookings
- Tax remitted for direct bookings but not Airbnb or Vrbo
- Tax remitted for direct bookings and Vrbo, but not Airbnb
- Changing channels that a tax is collected for (like when you go Vrbo API or Airbnb custom taxes)
- Tax Surcharges and Discounts
- Cancelled Bookings
- Changing tax rates
- Registration information
- Configuring Airbnb custom taxes
- Taxes and Channel Bridge
- Taxes and Booking.com
- How do taxes create booking charges?
- Non-taxable Rent
Tax remitted for all bookings, regardless of channel
This is the simplest scenario -- just set a tax name and amount. The defaults will make it applicable to all properties and channels.
Tax remitted for some properties and not others
If your properties are in different areas, they'll often have different taxes. Maybe the state tax is applicable to all properties but one local tax is only applicable to some properties and other local taxes are applicable to other properties.
To configure the property applicability for each tax, set the Properties setting under the Criteria section.
Tax for stays under 30 nights and not for longer stays
Some areas have tax due only for short term stays and not for longer stays. To define what "long term" means, set the Max Nights setting under the Criteria section. Anything over that number of nights will not have the tax applied.
Tax remitted for Vrbo bookings
API-connected
When you API connect to Vrbo, you become the Merchant of Record. Vrbo requires this of all API-connected hosts. This means that you are entirely in control of those Vrbo booking financials, which include collecting and remitting taxes on your own behalf.
Users need to include Vrbo in the listing sites that their taxes apply to in order for those taxes to be passed to guests on their Vrbo bookings.
Vrbo no longer collects and remits any taxes automatically, on your behalf.
As a Vrbo API-connected host, you will both collect and subsequently, remit to the proper jurisdiction, any taxes collected.
To configure channel taxes, navigate to Settings > Pricing > Taxes > +Create Tax > Channels.
iCal-connected using Channel Bridge
Depending on the location of your property, Vrbo will collect and remit all, some (or even no) taxes, of iCal-connected properties that regularly use the Channel Bridge process.
OR recommends not solely relying on Vrbo to collect and remit necessary taxes and that users should always collect full details of all the relevant tax requirements information to make informed tax decisions.
Tax remitted for direct bookings but not Airbnb or Vrbo
If Airbnb and Vrbo (or any other channels) are remitting the tax in your area, set the Applicability setting in the Channel section to "Everything but" the channels that remit the tax.
Tax remitted for direct bookings and Vrbo, but not Airbnb
Similar to the above, if you're remitting taxes for direct and Vrbo bookings, but NOT Airbnb bookings, set the Applicability setting in the Channel section to "Everything but Airbnb". This will be the case if you're Vrbo API integrated but don't use Airbnb custom taxes.
Changing channels that a tax is collected for (like when you go Vrbo API or Airbnb custom taxes)
If the tax applicability per channel changes over time, you can set effective dates with different Applicability settings in the Channel section. For example, if you start with Vrbo remitting the taxes but then later go API integrated, you'd have the first applicability "Everything but Vrbo". And then later on the API integration date, you'd have another applicability for All.
Tax Surcharges and Discounts
Municipalities' policies on how hosts handle taxes for surcharges and discounts can vary. OwnerRez recommends that users consult their tax authorities so that they can configure their surcharges and discounts correctly.
Surcharges
Users configure their surcharge taxes by navigating to Settings > Pricing > Surcharges > either a specific surcharge or Create Surcharge > Surcharge.
The default selection is Yes, that the surcharge is taxable.
Discounts
Users configure their discount taxes by navigating to Settings > Pricing > Discounts > either a specific discount or Create Discount > Discount.
The default selection is Yes, that the surcharge is taxable.
Cancelled Bookings
Municipalities' policies on how hosts handle canceled booking sales taxes can vary. Some may require full or partial refunds, while others may have specific policies mandating the remittance of the full tax amount regardless of the canceled booking.
Only you, the user, can know your sales tax situation regarding booking cancellations, but OwnerRez offers new flexibility in how sales tax is handled in the event of a booking cancellation.
Users can apply canceled booking criteria to their individual sales taxes by navigating to Settings > Taxes > your Taxes > Criteria > Canceled Bookings and can select between Still applies and Does not apply.Special note: Taxes can only be removed for bookings where OwnerRez manages the charges, such as direct and Vrbo bookings.
Changing tax rates
If tax rates change over time, you can add a new effective date and rate in the Rate section. For direct bookings, Vrbo API, and TripAdvisor API, those effective arrival dates will be respected. For Airbnb, they don't have applicable criteria so the tax will update on their site when the effective date is reached.
Changes to tax rates will only be applied to new bookings as they come in. They do not retroactively apply to any bookings that already exist, even if their dates of applicability would otherwise mean that they should.
- For direct and some API bookings, you can manually edit the Charges to include the new tax and (if necessary) collect an additional payment, but you should communicate with the guest first before hitting them with an unexpected charge.
- For channel bookings where the channel is collecting the payment from the guest, particularly Airbnb, the only way to collect additional taxes is by using the channel's Resolution Center or its equivalent.
- Airbnb does not support future tax rate changes. This means that bookings placed prior to the date of the tax change will continue to be charged the current (old) tax rate until the date of the tax rate change--even if the arrival occurs in the future changed tax rate.
Registration information
Each tax has a section for Registration information:
If you are intending for Airbnb to collect this tax on your behalf, this entire section is required to be completed - if you don't, Airbnb will ignore that tax.
If you are not using Airbnb, or you don't need special Airbnb configuration for this tax, then this section is not used programmatically, although it may be a convenient place for you to store the information regarding your various tax accounts.
Configuring Airbnb custom taxes
If Airbnb supports custom taxes in your area, you can configure them in OwnerRez. For more information, see the Airbnb API: Collecting and remitting taxes article.
For taxes that are both collected and remitted by Airbnb, those taxes won't be included in the charges at all, so it won't matter if PM or owner is set as the party that remits them.
In general, you should set that the PM or owner will remit taxes based on what is supposed to happen with your direct bookings, and ignore Airbnb's tax handling.
Taxes and Channel Bridge
When you import or update bookings using Channel Bridge, OwnerRez will populate any taxes that were remitted by the channel on the lower Guest Channel Fees grid of the Charges tab of the booking -- that shows amounts paid by the guest to the channel directly.
If any taxes were remitted by you (Vrbo calls these "partner tax", Airbnb "passthrough tax"), those taxes will be populated on the upper grid on the charges tab of the booking which shows charges between you and the guest.
Note that neither Vrbo nor Airbnb provides a tax breakdown for the taxes remitted by you -- only a total. So Channel Bridge will break up that total based on the taxes that are effective in OwnerRez for that channel. If a tax is remitted by the channel, not you, make sure to configure that tax to not be applicable to the channel -- meaning that it doesn't pass through to you.
For example, if Vrbo is remitting state tax and you're remitting local tax, you'd set the state tax channel criteria to "everything but Vrbo". Note that if you switch to Vrbo API, Vrbo will pass through all taxes to you to remit, even if they used to remit some of them for non-API bookings. In that case, you'd end up with an "everything but Vrbo" applicability from the beginning until the API cutover date, and then Vrbo would be included after that:
Taxes and Booking.com
Whether you are connected to Booking.com using our API or not, it is not possible to configure taxes in OwnerRez and have them used by Booking.com. You also cannot configure them on the Booking.com control panel. You must call Booking.com support on the phone or internal messaging system, telling them your taxes, and asking them to manually configure those taxes on your listings.
Until you have done this, taxes will not be charged on your Booking.com bookings. You'll have to deduct them from the rent you collect.
How do taxes create booking charges?
Once you've got taxes configured correctly they'll be applied to bookings that come in after the configuration is complete. Depending on the channel, this may be done a bit differently, so here's how it all breaks down:
- Direct Bookings - For quotes created in OwnerRez, whether direct booking or sourced from an inquiry on a different channel but reserved in OwnerRez, charges are created automatically based on the taxes configured in OwnerRez and applicable for the channel as of the booking dates.
- Vrbo API bookings - For these bookings, Vrbo will send the tax item and amount for each configured tax and charges will be created on the booking accordingly.
- Other API channels (Airbnb, Booking.com, TripAdvisor) - For these channels, the channel doesn't send an identifier we can match to the tax configuration in OwnerRez. Instead, we split up the total taxes sent by the channel to be remitted by you based on the tax configuration in OwnerRez -- see below.
Taxes remitted by the channel will be populated on the Guest Channel Fees section of the Charges tab. - Channel Bridge Bookings (both Airbnb and Vrbo) - For channel bridge, we can access information about taxes remitted by the channel. Those will be populated on the Guest Channel Fees section of the Charges tab.
For any taxes remitted by you, neither channel sends an identifier we can match to the tax configuration in OwnerRez. Instead, we split up the total taxes sent by the channel based on the tax configuration in OwnerRez -- see below.
Tax calculation logic for total tax matching
For channels that send tax total only or don't send matchable identifiers, we use the following steps:
- Total up all taxes sent by the channel
- Run a quote for the booking dates in OwnerRez and capture the effective taxes and amounts.
- Deduct any flat taxes configured in OwnerRez from the channel total taxes and create those charges on the booking.
- If there are percentage taxes, split the channel total tax by the ratio of the percentages configured in OwnerRez and create charges accordingly.
For example if you have a 15% tax A and a 5% tax B, then tax A would get 75% of the taxes sent by the channel while tax B would get 25% of the taxes sent by the channel. - If there is a remainder but no percentage taxes are effective, that amount is stored in a generic "Channel name tax" charge.
Non-Taxable Rent
There are a handful of jurisdictions where Rent is not taxable, only Surcharges. If your property is in one of these locations... lucky you! Go to Settings > Pricing Preferences > Rent Taxability and select this option:
Changing the Rent Taxability setting will apply to both direct and API-connected channel bookings. It is highly unlikely you will need to use this checkbox, no matter how tempting it might seem. Only do this on the advice of a suitable legal or accounting professional in your jurisdiction.