V.I. Answer Desk: Is USVI Collecting Tax on Villas and AirBnB Rentals?

Some Source readers have written questioning if small villas and people renting rooms and houses through services like Airbnb are paying their fair share of taxes.

Getting taxes from these small-scale renters has been an issue for several years, with hotel owners concerned about unfair competition from people who may not pay taxes or even have business licenses, and senators and V.I. government concerned about revenues.

To legally rent a vacation room, those involved must first get the proper business license, Licensing and Consumer Affairs Commissioner Devin Carrington said in a statement in 2015. Not doing so is a violation that will result in a citation, according to Carrington.

And owners must pay hotel occupancy tax, income tax and gross receipts tax as required by law. Hotels, villas, timeshare owners and anyone else renting any lodging for a period of less than 90 days, must pay 12.5 percent of the price of the room rental.

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There is evidence that some are still not paying taxes, but the government has been increasing efforts on enforcement and hotel tax revenues and the number of entities paying hotel occupancy tax have both increased dramatically over the last few years.

In 2012, St. Thomas real estate management company owner Kirk Boeger testified to a Senate committee about this problem, describing how properties were advertised online without any mention of hotel taxes in their billing. He said he "would not be surprised if the V.I. is missing collections for upwards of $20 million per year from hotel tax alone."

Several senators latched onto that number and cited it again and again as they pressured Internal Revenue Bureau officials to do more to collect these funds. Unfortunately for the government’s budget, it appears to be vastly overly optimistic as total hotel occupancy tax revenues, from every hotel room in the territory combined with every villa and Airbnb renter, was barely more than that amount that year.

The only way the estimate could be accurate would be if most people who visited the U.S. Virgin Islands stayed in villas rather than hotels, and there is no evidence that this is so.

In multiple legislative hearings, IRB officials testified repeatedly that there was room to collect more but that the amount was far less than $20 million per year.

But it would still appear to be millions of dollars in revenue.

In 2014, IRB officials told senators there were 1,676 USVI properties advertised on the internet, with 24 on Water Island and St. James; 276 on St. Croix; 576 on St. Thomas; and 800 on St. John. More than one property can be advertised by one registered, taxpaying entity, so the number of properties and the number of taxpayers is not the same.

For contrast, in 2014, St. Thomas and St. John had about 2,900 hotel rooms, according to the V.I. Hotel Association, while the territory as a whole had 4,818 rooms in total in 2014, according to Smith Travel Research.

In 2013 and 2014, the Legislature passed laws increasing penalties for not paying hotel occupancy tax and directing IRB to assign two employees to audit people renting out apartments and homes on a daily and weekly basis.

Collections and the number of entities paying hotel occupancy taxes have increased steadily. According to the Office of Management and Budget, in 2012, the government received $20.9 million in hotel occupancy tax revenue from some 818 taxpayers. In 2013, revenues went up a tiny bit, to $21.5 million, and the number of taxpayers/property owners increased by 41 to 859. There was a larger increase in 2014, with $22.9 million in revenue and 81 more taxpayers. And 2015 saw 73 more taxpayers, generating $24.6 million.

On Dec. 20, 2016, IRB Director Marvin Pickering told senators that he and other officials recently met with Airbnb officials and are looking for a model to get information from Airbnb on V.I.-based revenues.

"So there is light at the end of the tunnel for accurate revenue coming in from that area?" Sen. Clifford Graham asked Pickering.

"That is correct," Pickering said.

Earlier in 2016, Pickering told senators he was working to hire more revenue collecting agents to boost enforcement and audit efforts in this and other areas.

Calls to Pickering for more details on IRB’s efforts in this arena had not been returned as of Tuesday.

So to recap: those renting out rooms need to get a license and need to collect and remit the 12.5 percent V.I. hotel occupancy tax. Enforcement has increased, bringing in several million dollars per year and increasing the number of people paying their taxes. Still, not everyone is paying and the government is continuing to work with Airbnb and similar services on getting better information on who owes what.

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