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. 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 30 days, and that owner never paid any TOT to the City, the City can seek repayment of taxes for each stay of less than 30 days 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 30 days or more (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 the taxes to the City on the Airbnb host’s behalf. However, if you are using a site other than Airbnb, it is strongly suggested that you start paying these taxes to at least stop the City from being able to go back indefinitely to collect these TOT back taxes. 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. 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

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 2

  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)

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