Vacation Rentals Subject to Sales Tax in Idaho
- Apr 10, 2013 | Gail Cole
Say you live in Idaho, own a vacation home there, and from time to time rent that home to others for short term lodging. According to a ruling recently released by the Idaho Tax Commission, you owe taxes on the rental of that property: a 6% sales tax, and a 2% Hotel/Motel Room and Campground Sales Tax (commonly known as the travel and convention tax).
The ruling pertains to a taxpayer who argued that she “is not in the business of furnishing rooms nor is she actively engaged in recurring solicitation of business.” She referred to her vacation home as “a passive investment.” The tax commission disagrees, noting that the property is advertised through a “Vacation Rental by Owner” website, and that the “size of the audit deficiency is indicative of an on-going business….” Furthermore, “[t]he taxpayer lists rental income on income tax returns….”
Statewide Sales Tax
Pursuant to relevant Idaho tax law, a “statewide sales tax is imposed on short-term lodging.” “Sale” includes “Providing hotel, motel, campground, or trailer court accommodations… .” (Idaho Code § 63-3612).
Statewide Hotel/Motel Room and Campground Sales Tax
A tax is also imposed on sales of hotel, motel, or campgrounds. “Sale” here refers to “the renting of a place to sleep, to an individual by a hotel, motel, or campground for a period of less than thirty one (31) continuous days. (Idaho Code § 67-4711(7)).
Vacation Rental = Hotel/Motel
The taxpayer argued that vacation homes are mentioned neither in the Sales Tax Act nor the Hotel/Motel Room and Campground Sales Tax code. The tax commission acknowledges that this is true. However, the travel and convention tax code defines the terms hotel/motel as establishments “which provide[s] lodging to members of the public for a fee, and shall include condominiums, townhouses or any other establishment which makes a sale….” (Idaho Code § 67-4711(5)).
Furthermore, the tax commission quotes the following from Hotel/Motel Room and Campground Sales Tax Administration Rules:
“The words hotel or motel means any person, partnership, corporation, trustee, receiver, or other association, regularly engaged in the business of furnishing rooms for use or occupancy, whether personal or commercial, in return for a consideration or which holds itself out as being regularly engaged in such business.”
Under Idaho Sales Tax Administrative Rules, “Fees charged for providing hotel, motel, and campground accommodations are subject to the state sales tax….”
The taxpayer may not consider herself in the business of renting lodging, but the Idaho tax commission does consider her to be in that business. As such, it holds her liable for back taxes, interest and penalties.
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