Technology

New tax-filing tool helps short-term rental hosts comply with the law

HomeAway can help users get a handle on confusing tax requirements for short-term rentals

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The meteoric rise of Airbnb has transformed hordes of consumers into part-time property managers or landlords.

Many of these people don’t know how to comply with the tax and licensing requirements for rentals. And trying to get a handle on such regulations, which local and state governments all around the country are investigating, can be challenging.

“Most owners want to be compliant with taxes, but may not understand how their property is taxed, and may often think they must only file federal income taxes on their rentals,” said Rob Stephens, CEO of HotSpot Tax, in a statement. “It can be incredibly confusing for owners to figure out what the taxes and regulations are in their particular location.”

HomeAway, a short-term rental website that focuses on vacation rentals, has unveiled a new tool in partnership with HotSpot Tax to help clear up some of the confusion.

HomeAway bills its new “HotSpot Tax Center” as “the only automated Web-based tax filing solution for state and local short-term rental taxes.”

The tool is powered by HotSpot Tax, and appears to be have grown out of HomeAway’s financial investment in HotSpot Tax.

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It’s possible that white-label versions of the tool might soon pop up on other short-rental sites. In announcing its investment in HotSpot Tax in August 2014, HomeAway said HotSpot could leverage HomeAway’s backing “to expand upon its existing stand-alone tax compliance product to offer an integrated solution across many short-term rental platforms.”

HotSpot Tax was acquired in February by Avalara, a provider of compliance software. (HotSpot Tax will soon be renamed Avalara MyLodgeTax.)

HomeAway users who access the new tool can learn about tax-related topics including income taxes, lodging taxes, licensing and zoning requirements.

They also can enter their address to see taxes owed (tax rate) from every rental transaction, number of tax returns to file annually, minimum number of nights a property must book to be deemed taxable, and information about the number of registrations or licenses required.

The new tool complements the tax collection features of HomeAway’s online booking platform, which lets rental owners enter the appropriate tax rate to be tacked on to each rental transaction and to access previous invoices.

“This is a critical time in the growth of the industry and the services of HotSpot align perfectly with HomeAway’s requirement for all vacation rental owners to be aware of and comply with their legal responsibilities,” said Carl Shepherd, chief strategy and development officer at HomeAway, in a statement.

Email Teke Wiggin.