Transient Occupancy Taxes – Do I Really Have to Pay Them?

Most cities in San Diego County, and throughout California, impose something called a “transient occupancy tax” (TOT) on “transients,” or persons who occupy a hotel, RV park, campsite or short term rental property for a period of less than 30 days. (**UPDATE: see blog post 6-10-19 for City of San Diego**) This TOT applies to short term vacation rentals under Airbnb, VRBO, and other similar sites. As an Airbnb host, the ultimate responsibility to collect the tax from the guest falls on your shoulders, and whether you collect the tax or not, you are responsible for payment to the City. Currently, the City of San Diego imposes at 10.5% TOT on the total monthly rental amounts collected by owners from guests. TOT is paid monthly to the City Treasurer. Additionally, owners are required to obtain a “Transient Occupancy Registration Certificate” from the City within 30 days of starting rentals.

What many short term rental hosts don’t know is that the failure to pay this tax carries heavy penalties that can be imposed by the City. Non-payment of TOT is a misdemeanor under the San Diego Municipal Code and violations can be punishable by a $1,000 fine, or 6 months in jail. The City is starting to enforce the payment of these TOT taxes more thoroughly against property owners who are utilizing their property for short term rentals through random audits. It is important to point out that if an owner has never paid the TOT to the City, the City is entitled to collect back taxes against that owner going back as far as when the first taxes would have been due. For example, if an owner started renting their property in 2007 on Airbnb for stays of less than a whole month (**UPDATE see new Blog Post 6-10-19 for City of San Diego**), and that owner never paid any TOT to the City, the City can seek repayment of taxes for each stay of less than a whole month going back to 2007. Needless to say these back taxes could be significant. Additionally, the burden falls on the owner to keep all records evidencing payment of these taxes, and each short term stay. The City of San Diego Municipal Code only requires that records be kept by an owner for 3 years, however this is misleading because if you have never paid the taxes, and have no records to defend yourself against a tax audit by the City, the City auditor will be entitled to estimate the number of short term stays based on your current rental reports. The auditor will not presume any of the stays were whole month stays (and thus not be subject to the tax) unless you have proof to the contrary. This audit estimation would not be in the owner’s best interest. Moreover, the City is also entitled to impose a 25% penalty on the total taxes owed by the owner for their failure to submit payment of these taxes.

It is my understanding that Airbnb now imposes these taxes automatically in their booking rates, and Airbnb submits these taxes to certain cities in California on behalf of the host (*note that each owner should check to see if their City is on the list that Airbnb remits taxes for). However, if you are using a site other than Airbnb, it is strongly suggested that you start paying these taxes immediately. If you have filed TOT with the city, in California, there is a 4 year statute of limitations which runs from the date the taxes were first owed and not paid for the city to file a lawsuit (note that this statute of limitations does not apply in cases of fraud or failure to pay the taxes). Even if Airbnb is submitting these payments on your behalf as a host, I would strongly suggest maintaining accurate records of all bookings and all taxes being paid. The consequences of not paying the tax are significant in comparison to the small monthly amount you would have to submit to the City and will save you the stress and headache of an audit down the road.

City of San Diego Municipal Code

*UPDATED 6-10-19

This article is for informational purposes only and does not constitute legal advice. For specific questions related to this article, please contact the Law Office of Ashley M. Peterson, and we would be happy to answer whatever legal questions you may have.

Comments 16

  1. Is transient Occupancy tax calculated on amount paid or amount due?
    Example: a room is rented for $25 for 1 night. The amount due is $25, and the amount paid is $25, then the TOT is $2.5

    Example a room is rented for $25 for 1 night and the transient is offered a discount of $20, thus the amount due is $25, but the amount paid is $5.

    It the TOT $2.5 ($25×10%) or is the TOT $.50($5×10% =50 cents)

    1. Post
  2. You are giving wrong advice regarding “…transient occupancy tax” (TOT) on “transients,” or persons who occupy a hotel, RV park, campsite or short term rental property for a period of less than 30 days.”

    There is no definition of a “Month”“ under Definitions in the Municipal Code BUT hidden under the definition of a Transient” is this:
    “Transient” means any Person who exercises Occupancy, or is entitled to Occupancy,
    by reason of concession, permit, right of access, license, or other agreement for a
    period of less than one (1) month. A month is defined as the period of consecutive
    days from the first calendar day of Occupancy in any month to the same calendar day
    in the next month following, or the last day of the next month following if no
    corresponding calendar day exists.
    (Amended 6–1–1999 by O–18650 N.S.)

    Almost every large agency in San Diego got caught on this in audits in 2016 that went back to 2013 and we had to pay the 10.5% plus the TMD of .05% on every rental that was for 30 days in a 31 day month. It added up to many thousands of dollars when you have 50-100 properties. And the city would not take any responsibility for not making that clear to us.
    Also, they said if you have to move someone from one property to another property during the month due to a flood or other emergency, then you have to charge the guest the TOT as you make them move, kicking and screaming. I got caught on that one as well but won that one in my second appeal. You will NEVER win anything in your first appeal which is with the city but I won several things, over $9000 worth in my second appeal that was in front of a judge who does not work for the city.
    They make mistakes and they make up rules to suit their fancy! Pool heat is not taxable. Credit card convenience fees are not taxable. and having to move someone in an emergency as long as you are moving them to one of your other properties is not taxable according to my judgement. ALWAYS appeal to the second level.

    1. Post

      Thank you for your comment Nancy. I have been aware of this statute for a while and have been meaning to post a blog update as I have received several calls from clients in the last 6 months about this issue. I just published a new blog article on this issue today to alert property owners. Most cities in CA do have the “less than 30 day stay” definition for a transient, but San Diego is unique since our statute is outdated and was enacted prior to the beginning of the STR wave in 2007.

  3. If you list on sites outside airbnb(homeaway and and collect the rents and tax on behalf of the homeowner who pays the tax. You or do do you give the tax to the homeowner to pay?

    1. Post

      Hi Jeff. The property owner is ultimately responsible for paying the TOT taxes to the City whether it’s collected from the guest or not. Ideally the property should be rented at a daily rate that would cover any tax payment.

      1. How about if the seller didnt pay the taxes since 2018 and the new owner took over the property in 2023 Jan, who is liable to pay the TOT taxes, the new owner or previous owner (seller)

        1. Post

          A new owner would be responsible for any unpaid taxes on the property. You would likely have to send a demand letter and possibly sue the prior owner to collect on the amounts that they were supposed to have paid if you are now being charged the taxes by the City.

  4. I have an Airbnb in Mendocino county . Airbnb never told us about transient tax . Now after 2 and 1/2 years I got a letter that we owe 10 percent of our income and have to pay it ASAP. It’s overwhelming . Any suggestions?

  5. Hi, here is an interesting question about TOT. If a person stays in a hotel for more than 30 consecutive days, but this is by more than one hotel reservation. For example, a 2 week stay in a hotel, followed by another 3 week stay in the same hotel. The first reservation has a check-out check-in simultaneously, so no gap in the occupancy. Is this exempt from TOT?

    1. Post

      I doubt it. Since it’s several bookings, it would be treated as 2 week or 3 week stays subject to TOT per the City.

      1. Not true Ashley you can have as many bookings as you want just as long as you your in the same hotel for over 30 days in California (I’m in San Diego so 100% sure on this area, 80% sure this applys to everywhere in Cali but some county’s might have different tax %s) but in San Diego (most likely anywhere else n Cali) even if you change rooms doesn’t matter you are still exempt and entitled to a refund. But from my experience shittty lower end hotels wanna try play stupid and you have to hit up director of finance in your county

        1. Actually Ashley is technically right and you will still have to pay the tot tax (unless you made agreement with hotel informing them you plan to stay over 30 days). But the good news is after 30th day you can tell your hotel operator your no longer transient and request to get your taxes back.

          And just as an fyi as well you are eligible to get taxes back on 3rd party stays, but only on the tax rate based on the wholesale rate that operator charged 3rd party (even tho most hotels will inaccurately say your not)

  6. I was just notified by the City’s tax collection agency that I missed a TOT payment in Oct 2020. I had no idea. That was 28 months ago. Hope badly can they hurt me?

    1. Post

      If it’s just one payment, you should be able to just pay the amount demanded plus any “late” penalties and be done with it.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.