Florida County Property Appraisers take hard line on the rental of property through the popular Airbnb service.
It is a longstanding tradition for technology and law to be at odds. Technology moves at fever pitch and changes the social landscape. Law, by comparison, is slow moving. It favors concrete, established norms. By way of example: popular home share website Airbnb makes it easy to rent one’s house, in whole or in part, to help cover costs or make income on the property. While the sharing economy created by apps such as Airbnb is quickly becoming the norm, the law is still based in the more traditional paradigm – a home is either one’s residence or the property is commercial. This has created a considerable struggle between Airbnb and Florida’s taxing agencies. Now the problems are beginning to trickle down to the homeowner level. Specifically, homeowners renting property on Airbnb are now under fire by at least one county Property Appraiser.
The issue began with the Department of Revenue (“Department”) and Property Appraisers wanting the app to capture the sales tax and tourist development tax associated with the rentals. The rental of real property in Florida is a privilege subject to the State’s 6% sales tax. Additionally, Section 125.0104, Florida Statutes, (“F.S.”), provides for the collection of the Tourist Development Tax or “bed tax” imposed by individual counties and municipalities, though the administration of the bed tax can be by the Department of Revenue or the county. Hotels are required to charge guests both sales tax and bed tax in counties where applicable. This created an advantage for Airbnb, as their pricing was not subject to these taxes charged on the cost of a hotel room. The advantage made the tech company a more affordable option for travelers. This advantage has been the source of much debate nationwide. In Florida, the debate was especially pertinent. Tourism is the one of the State’s biggest industries, and the State of Florida was missing out on taxes for those tourism dollar spent. Effective December 31, 2015, Airbnb entered an agreement with the Department to start collecting taxes on rentals. This made Florida the fourth state to start collecting tax on Airbnb rentals, following the footsteps of Washington, Rhode Island, and North Carolina.
For the counties administering their own Tourist Development Tax, this was just the beginning. These counties wanted Airbnb to collect and remit the bed tax for them. Some sued Airbnb directly; others, like West Palm, sued the Department to get the terms of their agreement with Airbnb. This has been an administrative headache for the company and the counties. Now that headache is about to trickle down to homeowners.
In Florida, Section 196.061, F.S., was amended in 2013 to provide that the rental of all, or substantially all, of a dwelling shall constitute abandonment of the homestead, and that rental of the property for more than 30 days per calendar year, for two consecutive years, also constitutes abandonment. Recently, a warning was issued by the Miami-Dade County Property Appraiser’s Office. The Property Appraiser has taken a hard line on these transactions, asserting the rental of a homestead property through the Airbnb app is “tax fraud,” and the county is looking to disallow homesteads for those engaged in renting out a room in their home. This warning should be taken seriously by those who have been receiving the benefits of homestead, while renting the property. The Property Appraiser has the ability to disallow homestead going back ten years. These assessments can be very costly, in addition to the loss of the $50,000 exemption, the property will be revalued for each year with a 10% cap on increase, instead of the standard 3% for homestead property. Add on to that a 50% penalty and 15% interest rate.
Property, in the eyes of the law, is either residential or commercial. Airbnb properties tend to exist in that grey area, where a property can be someone’s home, and generate revenue for the owner. Homeowners who utilize this service have three options. They can do nothing, and hope for the best. Second, they can remove the homestead altogether. This is the most conservative option. The third option is squarely in the middle, and involves some negotiating. The Property Appraiser’s office can pro-rate the amount of homestead removed from the home, based on the size of the rental, proportionate to the size of the house. For Taxpayers who choose to come clean, they can have the homestead removed from the property, in part. The pro-rated portion of the home being rented would be re-valued at the current rate, and then increases to tax per year would be capped at 10%. This option, while yielding the best long-term result, can be complicated. Where the State of Florida allows Taxpayers a voluntary disclosure of liability, counties have no program that parallels this, which makes disclosing potential liability a complicated issue best handled by a professional.
About the author: Amanda Levine is an associate attorney with the Law Offices of Moffa, Sutton, & Donnini, P.A. Her primary practice area is Florida tax controversy, with focus on real property issues. Amanda received a B.S. in Accounting from University of Central Florida. She spent several years working in public accounting before attending Nova Southeastern University Law School. She received her Juris Doctorate in 2014. During her time at Nova Law, she was the Executive Justice of Academics for the Moot Court Honor Society, as well as the Finance Chair. She was awarded by the National Order of the Barrister, a national honor society which encourages oral advocacy and brief writing skills. You may contact Amanda via email at AmandaLevine@FloridaSalesTax.com or 954-642-1088 or read more about here on her BIO HERE.
Authority
Section 196.061 - Rental of homestead to constitute abandonment
Section 125.0104 - Tourist development tax; procedure for levying; authorized uses; referendum; enforcement
Rule 12A-1.061 - Rentals, Leases, and Licenses to Use Transient Accommodations
Warning to Miami-Dade’s Airbnb hosts: You may risk tax fraud - Miami Herald, March 17, 2017.
Additional Resources
FL SALES TAX AUDIT - HOTELS & EXTENDED STAY MOTLES, published March 12, 2017, by James Sutton, CPA, Esq.
FL Taxpayer Wins! Reservation & Cleaning Fees Not Taxable!, published July 12, 2016, by James Sutton, CPA, Esq.
GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.
FL TAX – VOLUNTARY DISCLOSURE PROGRAM CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.
FL Taxpayer Wins! Reservation & Cleaning Fees Not Taxable!, published July 12, 2016, by James Sutton, CPA, Esq.
GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.
FL TAX – VOLUNTARY DISCLOSURE PROGRAM CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.