[00:00:05] Speaker A: Welcome to the Short Term show. The show about short term rentals and long term wealth with real property owners hosting real properties who are crushing it in the vacation and short term rental space.
And here's your host, Avery Carle.
[00:00:29] Speaker B: Hey y'.
[00:00:29] Speaker C: All.
[00:00:29] Speaker B: Welcome back to another episode of the Short Term Show. I'm your host, Avery Carle and today we are going to talk about an app that a lot of you have a lot of questions about all, basically all short term rental owners should be using it, if you're not already. So listen up.
I've got Pam Knudsen at Avalara Mylogitex and she's going to talk to us a little bit about what that platform does and how we should be using it. How's it going, Pam?
[00:00:56] Speaker C: I'm great. How are you doing?
[00:00:58] Speaker B: I am doing so great. Thanks for coming on.
[00:01:01] Speaker C: Of course. Thank you for having me.
[00:01:03] Speaker B: Yeah, yeah. So for our listeners who might be new to short term rentals, can you explain what Avalara mylog tax is?
[00:01:13] Speaker C: Sure. Al Mylodge Tax is really, it's a technology that helps enable their compliance to be a little bit more straightforward and easy so they don't have to navigate the ever shifting landscape of compliance when it comes to the taxes that they have to, you know, calculate, charge, collect and remit back to the taxing authorities as well as well as the licensing and registration that goes along with it.
[00:01:37] Speaker B: Gotcha. So guys, this is not about your income taxes with your CPA and things like that. This is how you pay your state and local occupancy tax, if there is one, bed taxes, sales tax, things like that. So, so this app helps you to do that. And can you kind of explain how an owner would sign up for and get hooked up with MyLogitex?
[00:02:02] Speaker C: Yeah, it's really simple. You can just go out to our website, you can go out to elder.com and you'll find the Mylodge, you can find the link to the Mylodge piece in there and you can just go out and you can sign up. It's an online buy, it's really straightforward that comes through and then you'll get contacted by our team to go through all the pieces of information we need to help you get set up.
[00:02:23] Speaker B: Awesome. So it's as easy. It's as easy as that. Guys, so let's talk about what all of these little taxes, I call them little taxes because they're just, you know, little bites out of your income here and there.
All these little taxes that depend. It's all dependent on what market you're buying in, whether your market has. They're going to have sales tax, usually, sometimes they call it an occupancy tax or a hotel tax or a bed tax. So when you're a new short term rental investor or an experienced short term rental investor, who figures out what those taxes are, calculates those, collects those, and then sends them in to the municipality that they need to go to, you
[00:03:05] Speaker C: know, and that's actually part of the complicated part of this is because it really kind of depends on how you do your bookings and whether you use platforms, whether you use direct bookings, like what you do. And it also is jurisdictionally dependent. So every jurisdiction has a little bit different set of rules that apply to this. And so knowing all of that is a critical function in this process to do this.
So I can go into some examples if you kind of want.
[00:03:33] Speaker B: Yeah, let's go into some examples and kind of figure out how people figure out these little bits and pieces.
[00:03:40] Speaker C: So, you know, part of what happens with short term rentals is unlike sales tax, sales tax is, for the most part, sales tax is very much done at a state level.
Short term rental taxes are done at a state and local level, which means you've got the state, the county, the city, and potentially some local special jurisdictions that may come in to apply.
And so you have to know what all of those taxing pieces are to determine what's the amount you need to charge from a tax standpoint. And then filing standpoint also goes across all of those different areas as well. State, local, city, or state, county, city. So you have to understand what each one of those are, and your booking platform may handle some of it. Like if you use something like Airbnb or VRBO or something like that, they may handle some of it, but they may not handle all of it.
If you have a property manager that you're using, again, they may handle some of it, but not all of it. And it's very jurisdictionally dependent.
Most of the states have said, hey, if you're using a booking platform like Airbnb, they're required to collect and remit the taxes on your behalf to us, but that doesn't necessarily apply at the city or the county level. That that has to be done. And so they're not doing it there, so you have to do it there. And then if you have any direct bookings where you're doing it yourself, then you're responsible for the whole thing.
So it's very dependent upon so many different factors
[00:05:09] Speaker B: that Sounds like a lot to figure out. So guys, my advice, when if you're new and you're looking at buying one of these things, call the municipality that you're buying in. So if you're buying inside the city limits, you want to call the city. If you're buying outside the city limits in an area, you want to call the county and ask them exactly what taxes are owed and then you can kind of go from there and figure out whether the platform's remitting those or that'll be up to you and how you're going to go about doing that.
[00:05:38] Speaker C: Yes, that's a great place to start. The jurisdiction should always be your primary source of truth because they're the ones that are going to be the ones that hold you accountable as a short term rental owner. They're going to be the authority that holds you accountable for doing what you're supposed to do. But also realize those change frequently.
Especially what we've seen over the last few years is that, you know, the states hopped on to the platforms, have to do this relatively quickly. They all kind of jumped onto that bandwagon, but now the locals are starting to do it a little bit more. And then now what's happening is property managers are starting to get lumped into that platform kind of mentality. And so they change frequently and constantly. So making sure that you're staying on top of that and connecting to make sure you know what you need to do going forward is really critical, I would imagine.
[00:06:27] Speaker B: And correct me if I'm wrong, it would make the most sense for a municipality, city, county, whatever, to kind of force the platforms to pay these things because you have a better chance of actually getting paid as the city or the county than depending on thousands of different short term rental owners to remember to do this and do it right or choose to do it, you know, you have people out there that just don't pay what they owe. So am I right about that? Are we seeing them kind of shift more towards wanting the platforms to do
[00:06:58] Speaker C: it everywhere that we are like, we're definitely seeing that movement that they want the platforms. And again, property managers is something that's really starting, we're starting to see, get pulled into the mix to say, oh, you're a property manager now, you're responsible on behalf of all the properties. You manage to do this.
And so it's really, we're seeing that shift move. But you know, if anybody's got direct bookings where you know somebody can you connect in directly with your guests to do this booking that still falls on you, that's not the platform or anything else because it's you. And that's where the jurisdictions are really starting to look at what are the mixes of things that are out there. And some of the technology that the jurisdictions are putting into play helps them actually identify where some gaps might be so that they can do a better job of enforcement.
[00:07:48] Speaker B: Oh, so cities are like putting technology and things in place to make sure that people are paying their taxes. So kind of creating a tax collection system.
[00:08:01] Speaker C: Yes, they're using technology that really uses things like AI, but it also uses data analysis to say, hey, we've seen this happen and you know, for, for this particular property, like this is the trend we've seen. Oh, that trend has drastically changed. You know, it's much lower. Why is it much lower? Are we missing something? They also have technology now that can go look at what's listed on a platform and see if that particular property is also registered and paying taxes appropriately for them. So they'll look at the state level and then they'll see at the local level is that actually, does it correlate? So enforcement is becoming much more technology driven than it's ever been in the past.
[00:08:46] Speaker B: I had a feeling with AI, stuff like that was going to start to get more automated because I used to, back in the day I used to sell short term rentals in Nashville and very quickly stopped, you know, shut down our Nashville office because it became such a, almost like a game for the investors to figure out not so much on the tax piece but as, as Nashville kept downgrading different, different zonings where, oh, you used to be able to do short term rentals here, but now you can't. So the existing ones are grandfathered and now the investors do all these crazy things like you have to buy the llc so that and everything in it, so that no transfer shows on the tax assessor's website, so it doesn't look like it was transferred. So because you're buying a grandfathered property and if you were to buy it the regular way, then it would show a property transfer and you won't get to have their short term rental license. So.
And you just kind of sent me down a tangent that they're creating all of these, all of these systems to do these things and to find these people and make sure they're not operating illegally.
And I'm not surprised at all to hear that.
[00:09:59] Speaker C: Yeah. Yes. And that is one of the things, you know, whether it's a, whether some, some cities that have put caps on the number of short term rental licenses that they're going to enable.
And so, you know, if somebody sells their property or whatever, you somehow have to be ready to try and fill the gap in the cap. But you may not be able to or you may not, you know, it's, it really is becoming a little bit more of a challenging thing to kind of manage and do. And you have to pay, you have to know what those requirements are so that, you know, you know, if you let your renewal of your license lapse, you may be out of business because, you know, you forgot to renew it on time. Oh, you know, and you're like, oh, well, okay, I'll go renew it. I didn't rent it for those two months either, right? Or, you know, hey, I'm going to, you know, I'm going to do a remodel on my rental. So I'm going to let my license lapse for a few months because I'm going to do this remodel and then I'll rent it again. You may not be able to get that license back. So you really do need to know.
And even if you're remodeling and you're not renting, you're still required to file the returns that are associated with that to say, hey, I have zero dollars in revenue. And if you miss any of those things, you put your ability to continue to have your short term rental at risk.
[00:11:12] Speaker B: Yes, you do. And
[00:11:17] Speaker A: thank you for listening. We sincerely hope that you find value in this podcast.
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[00:12:23] Speaker B: lodge tax kind of help people navigate? Because all of this is to somebody new who hasn't done these before, who hasn't submitted their sales and occupancy tax. This is going to sound like Greek to them. So now that we know all the different little taxes that they may have to be paying and things that they're keeping up with so how does my lodgetax help people organize all of this?
[00:12:49] Speaker C: Yeah, so when somebody signs up with mylodgetax, the first thing we'll do is make sure that you're licensed appropriately. So we'll look at the state and the local licenses that are required. We'll help you get those to make sure that you're in compliance with all of the jurisdictions that you need to be in compliance for. And then we'll tell you, like, here's the tax rates associated with those jurisdictions so that, you know, when you're looking at, you know, what your nightly cost is going to be and everything else, you know, what taxes to include in that or what that is going to mean for your guests, that, you know, hey, the tax rate is 15% and you're going to charge $200. Well, you know, there's going to be another $30 worth of tax that's associated with that. Are you including it in the nightly fee? Are you going to. Is it an over and above cost? And in some. And you have to generally present to all of those anyway, that's, that's another part of the federal legislation that's coming to play that's like a, you know, the full disclosure of all the fees that are associated with it. And so we'll provide you that information that says, here's the taxes that are associated with it, here's how often you have to file a tax return, those types of things. And then we'll actually, then every month somebody just has to come in, tell us how much revenue they got that month from their rental, and then we'll from there, take and calculate the tax, we'll prepare the return, we'll submit the tax return to the jurisdiction, all to make sure it's done in a timely fashion.
And if you're not renting, yeah, we'll do a $0 return, but that means you remain in compliance. And on your license and registration, we monitor that renewal process so that we can make sure your license is renewed timely.
[00:14:20] Speaker B: Okay, so we just report to you each month how much we made on each property and each market, and then you guys do the rest.
[00:14:29] Speaker C: Yeah, yeah. And we'll ask you, like, how much of this was from Airbnb, how much of it was from direct? Because we also know, hey, the platform's paying this tax, Airbnb is paying this tax. So you don't have to pay it, but you may still need to report it on a return.
And it's just reported in a different line that says marketplace paid, even if you owe zero tax because your entire booking was through the marketplace. A lot of the jurisdictions still require that you file a $0 return.
[00:14:57] Speaker B: Yeah, that's a lot of just little tasks that I cannot be bothered with personally, and I'm sure everybody else doesn't want to either. So it's really cool that you guys take care of that.
[00:15:09] Speaker C: Yeah, we've done some, you know, we've done some communication and studies and stuff like that where, you know, just a single property owner spends anywhere between, you know, like 60 and 100 hours a year doing nothing but trying to figure out the tax basis of this.
And so, you know, this takes it out of this, takes it out of their worries. Like, they can come. They spend 10 minutes reporting revenue to us once a month, and then we're good. And everything kind of flows from there.
[00:15:36] Speaker B: So you mentioned that you guys do check and make sure you're properly licensed and to make sure that you're keeping track of when the renewal is and what needs to be done. What happens when somebody like that tangent on Nashville that I went down a little while ago comes in and is not licensed correctly and does not intend to become licensed? They just, you know, they want to be a cowboy about it. What happens then?
[00:16:02] Speaker C: Well, if they're not licensed correctly, we can't file for them because that's a requirement for being able to file. So then what happens is they'll end up kind of going underground and trying to do this without being compliant, and they will get caught. Like, it's just, you know, a neighbor will complain about it, which will then cause the jurisdiction to figure out what's going on again, they'll use that AI that I was talking about to look at what's listed on various platforms and to make sure that that property is licensed correctly. They'll find it if something. If somebody is not doing this correctly, and then they'll get caught. And then there's, you know, they might have to go back, and if the registration is available.
Excuse me. They'll have to go back and get registered and then pay all the back taxes along with penalties and interest. That can be pretty extensive.
So, you know, in terms of trying to avoid it, they may cost themselves a lot more money because once they get caught, or they may end up being having some other type of, you know, legal action taken about the fact that they are doing something with a property that is not legally allowed.
[00:17:08] Speaker B: Yeah, they could not be allowed to get a license now after doing that, or worse.
[00:17:13] Speaker C: Or they could put other licenses at risk if they are shown to be a bad actor and they have some that are properly done, but some that are not. You know, that's just going to raise a lot of flags for the jurisdiction.
[00:17:24] Speaker B: So guys always color inside the lines is my advice.
[00:17:30] Speaker C: Yes, this is a big source of revenue. This is a huge source of revenue for these taxing authorities and they want every dime they can get.
And so they're getting better and better and better and stricter and stricter and stricter about making sure that people are following the requirements.
[00:17:48] Speaker B: Yes, especially in really tourism dependent areas. So I've posted a few times on social media recently about legislation in Florida either trying to completely eradicate or at least lower property taxes significantly. And every single comment on, on there from people who are not from Florida is like, how are you going to pay for schools? Like, how are you going to pay for anything? How what are you going to do about police? What are you going to do about departments? And we're like, guys, we're a tourism state. The tourism taxes, like, yeah, in Alabama you don't necessarily have that, but Florida makes a ton of money on tourism taxes and we, I believe, have a surplus because of that. So anyway, I don't really care about what the politics of that are, but people don't ever think about that when they think about revenue coming into states. They think about property taxes, they think about sales taxes, but they don't think about how much tourism brings in to a state, especially a state like Florida or a state like Hawaii. And that is a big, big revenue driver.
[00:18:55] Speaker C: Yes, it absolutely is. And you know, and most states, you know, Florida mentions you've got, there's a surplus. But a lot of states are hitting shortfalls and so they're looking at all the different places that they can go to to collapse what's unreported revenue. And the short term rental industry for a long time kind of flew under the radar because it was hard to identify where there was a short term rental. You know, it's not like they can wander around and see, oh look, somebody's renting that house as a short term rental. And that's where as technology has improved and enforcement has improved, they're starting to find those places that were not properly licensed or registered and we're not remitting those taxes. At one point in time, the percentage that were unlicensed in Hawaii was a pretty significant number. And Hawaii is really starting to crack down on that because that's the revenue they want.
And again, it pays for those services that everybody wants.
And they don't want their property taxes to go up. So it is very much a pass through tax.
[00:20:02] Speaker B: Yes. And guys, it's just what you have to do. It's part of running a business. You have to pay your taxes. So how does this affect or not affect, but how does what we talked about differ for people who do a lot of direct bookings like myself, we do a lot of just strictly Airbnb and vrbo. We don't like to complicate our lives. We've got a direct booking website. It's there for people if they want to use it. But it's like, eh, I don't really have enough hours in the day to be running Facebook ads on this, like my house in 30A or the Smokies. People are coming there, people are coming there that we're gonna get booked. But for people who do a lot of direct bookings, what does this look like for them? Because they're not running through the platform that takes care of it.
[00:20:46] Speaker C: Yeah. That means they're really responsible for everything. They are responsible for all of the tax collection, the remittance and the filing of those returns.
And the returns have very distinct due dates.
And so you've got to make sure you get it in by those due dates and reporting requirements. And the reporting requirements can change. It could be that you only have to file quarterly, but then they decide you need to file monthly. And each jurisdiction can have different reporting requirements. You may have to file, you know, monthly at the state level, but only quarterly at the county level, for example. So you really have to understand and know all of that and manage that. And that's where it gets complex is because things change, and they change frequently. And some things are notified really cleanly. Some things are a little bit more obtuse from coming from the jurisdictions. And so you really need to understand what's happening. And that's where using a technology platform helps you to actually manage those better. Because somebody else then is monitoring all of that for you and just letting you know when there's something you need to be aware of.
[00:21:53] Speaker B: I. I love that because I am not. These are the kinds of things that will be in the back of my mind for three months of, oh, yeah, I need to do that and never do it. So totally worth it to me. So you help people kind of navigate this, which is pretty complicated because it's so different for each market in each state. So what are some common pitfalls or misconceptions that you see people deal with when they're looking at maybe signing up with Avalara or navigating just these taxes in general.
[00:22:27] Speaker C: A lot of times what we see is people think that they have to be licensed at the state level, but they don't realize that there's a city and county piece that goes along with it or they just need to collect the state tax and they don't understand the more local taxes that have to happen.
There are things, there are certain jurisdictions that have what's called a nightly fee that in addition to the tax, you have to pay like an additional $2 fee for every night it was rented out. So there's. Those are the things that we see people miss that they, they've looked at this at like a state level, but they haven't looked at it at a more detailed local level. Or they actually do do everything through a platform and they think that because the platform is doing it or the property manager is doing it, they don't have to.
And that's inaccurate in a lot of cases. Again, in a lot of cases, even if everything's being remitted through the platform, they still require the property owner to file a return.
And so really understanding those, that's what we see coming through a lot is that they're either incorrectly licensed or they think that somebody else is dealing with everything and they don't have to do anything. And that's not an accurate statement.
[00:23:35] Speaker B: So what does it cost per property or per account to use Avalara?
[00:23:42] Speaker C: So it is.
So there's a sign up fee. There's a sign up fee. It's 299 as the signup fee. And that is really helping out with like, let's get you licensed correctly or make sure you're licensed correctly. Let's get you all set up in the system, all those types of things. And then there's a monthly subscription fee. And that monthly subscription fee is per property.
And monthly subscription fee is $39 a month, I believe right now.
And it's just. And that covers everything. That covers all the filings that we do. That covers everything. And then what happens is every month when you report revenue and we calculate the tax, we'll actually withdraw the tax liability amount from an account from your account that then we'll remit to the jurisdiction on your behalf. But if the jurisdiction sends a notice because they don't understand something on the return or they think there might be something wrong, we handle all of that.
So it really is. You report your revenue and then we take care of the rest.
[00:24:44] Speaker B: That is really, really nice. Totally worth it.
That's the last thing you want, is to buy a great property and you think you're rocking and rolling, you got your cash flow coming in and then one of these little technicalities jumps up and bites you. That's the worst.
[00:24:59] Speaker C: Yeah.
Yes, it really is. And again, you know, it's a, it's a simple monthly subscription that just covers everything so you don't have to think about, okay, well, I've got to do this and this and I've got to pay for this and this and this. It's really straightforward.
[00:25:12] Speaker B: Awesome. So what have I not asked you about? Avalara mylodge tax that our listeners would benefit from hearing before we wrap up the show.
[00:25:24] Speaker C: I think, you know, we've covered a lot, so I appreciate the conversation. You know, the one thing to be aware of is, you know, when somebody, you know, people often ask, am I committed to something? Because if I sell the property or I decide to go to a short term or like a long term lease or that type of thing, you know, you can cancel our service at any time. So you sign up. You can cancel it in any time if you sell the property. Great. You're not committed to having to pay for us for six more months after you've sold the property or something.
But we also do take into account, even from a rental, from a short term rental, if you decide that you're going to keep it as a short term rental but you're going to open it up to a traveling nurse, for example, and they're going to be there for 60 days. We also take into account, we know that that could be tax exempt based on the rules within that jurisdiction for longer term stays. And we'll also include that into it and calculate it into it so as long as we know the details, you don't have to worry about it.
[00:26:18] Speaker B: Awesome.
Well, Pam, thank you so much for coming on the show. And if our listeners want to learn more or sign up, how can they do that?
[00:26:27] Speaker C: Give us a link, go to www.avalara.com.
[00:26:32] Speaker B: awesome. And guys, we are going to put the links in the show notes so you'll, you can just click it on your phone and find it. Pam, you've been a wealth of information. Thank you so much for coming on and teaching our listeners about my lodgetex. I think this is one. I can't believe we haven't had you guys on before actually because this is such a, a big piece of being a short term rental investor. But everybody kind of forgets about it because it's not like a fun, sexy expense like putting your pool or design or something like that, so. But it's a very, very important one to make sure that you stay legal and compliant. So thank you so much.
[00:27:07] Speaker C: Well, thank you very much for having me. It's been a pleasure and happy to come back anytime.
[00:27:12] Speaker B: Thank you and listeners. We'll catch you next weekend.
