There are more than 200 Austin vacation rentals currently listed in Austin including units in major downtown Austin condo projects. According to the City, any unit that is rented for fewer than 30 consecutive days and more than $2 / day (Really! $2 / day!) must charge and pay the full hotel tax. Currently, the hotel tax is a very significant 15% composed of two portions: 6% to the state and 9% to the city. On a $2,000 weekly rental, that is a $300 tax bill.
A recent investigation, however, shows that the tax is widely ignored. In a very tight budget year, the City is eager to curtail nonpayment of taxes and the vacation rental industry is a primary target.
The vacation rental industry is growing rapidly. Increasingly, downtown Austin condo owners are listing their units on services such as Homeaway as opposed to offering units in the traditional long-term rental market. With rates of $1,000 – $2,000 per week, a few vacation renters can make a condo owner happy.
But with short-term rentals come hotel tax obligations. The City currently believes that many downtown Austin condo and home owners are not paying the tax that they owe. According to the Austin Chronicle:
“A search of a worldwide vacation rental website in January showed over 200 properties for rent in Austin. However, the Controller’s Office estimates that there are only approximately 80 short term vacation rental property owners registered with the City. OCA was unable to determine whether the short term vacation rental registered with the City match any of the properties listed on vacation rental websites because of the scope limitation discussed earlier in this report.
The properties listed on vacation rental website ranged in size from a studio space attached to a private home suitable for two people to a six bedroom home suitable for fifteen people. The rental rates ranged from $100 to $3,000 per night. In addition, there are other websites where vacation rental properties may be advertised. There may also be properties that the owners do not advertise. Therefore, the short term vacation rental properties not registered with the City could represent a loss of HOT revenue.”
The City report makes it clear that the tax must be paid on vacation rentals and recommends that additional steps be taken to notify owners of vacation rentals of the tax obligation and to collect owed taxes.
While it’s unclear how much revenue this represents, it’s clear that more action is on the horizon to collect unpaid taxes on short term house and condo rentals.