The (VT) Tax Man Cometh.

[Ski Diva]

Anyone affected by this? Or will this make a difference in what you do for next year?

http://www.rutlandherald.com/article/20090508/NEWS04/905080378/1002/NEWS01

 

[GrilledSteezeSandwich]

seems totally legit..Vermont has some of the highest taxes in the nation..the 9% meals tax is BS..

 

[mondeo]

What's a short term lease?

Add another $100 to my house bill next year. Although depending on the house (the ones not run as a business,) the owner could probably write off more expenses than income with a halfway competent accountant.

 

[Glenn]

Government sucks.

 

[Mildcat]

I'd comment but with the "No Politics" rule I'll just say that's why I think VT. sucks.

 

[GrilledSteezeSandwich]

Government sucks.

somebody has to pay for the roads and the people on welfare..

 

[madskier6]

Although depending on the house (the ones not run as a business,) the owner could probably write off more expenses than income with a halfway competent accountant.

The tax is not based on whether the establishment makes a profit. It's based on the amount of rent charged. It's like a sales tax. Posting a loss won't help you get out of paying the meals & lodging tax.

 

[Stache]

One of two things will happen.
Ski Houses will go "underground" or "under the table"
OR
The way they are advertised and marketed will change.
Look for more ads that read "Roomate wanted to share rent & utilities.
Are they going to start banging in the doors on every apartment house in Rutland that may rent month to month or for 3 or 5 month terms?? How about a one year lease that is breakable after 5 months??

As creative as the tax man gets the tax "cheats" will be ten steps ahead of him.

 

[JerseyJoey]

The tax is not based on whether the establishment makes a profit. It's based on the amount of rent charged. It's like a sales tax. Posting a loss won't help you get out of paying the meals & lodging tax.

True, but once you start "CHARGING" a sales tax and collecting it on behalf of the state, the house is now considered a business. Any competent business person would form an LLC and use this corp to own the house. Now you can start writing off other expenses as well.

Remember, an LLC is very different from an S or a C corporation. The profit or losses from an LLC fall back to the owners personal tax return, as opposed to an S or a C that has to file it's own tax return as an independent corporation.

It would seem that any owner of an LLC could easily make up for the room and meals tax with expenses that the the house (LLC) incurs during regular business operations. That's why so many people own investement properties as LLC's. There are liability advantages as well when running a business/investment as an LLC.

Disclaimer: In no way is the above statement meant as any advice, business or otherwise, and is intended solely for entertainment purposes only.

 

[madskier6]

True, but once you start "CHARGING" a sales tax and collecting it on behalf of the state, the house is now considered a business. Any competent business person would form an LLC and use this corp to own the house. Now you can start writing off other expenses as well.

Remember, an LLC is very different from an S or a C corporation. The profit or losses from an LLC fall back to the owners personal tax return, as opposed to an S or a C that has to file it's own tax return as an independent corporation.

It would seem that any owner of an LLC could easily make up for the room and meals tax with expenses that the the house (LLC) incurs during regular business operations. That's why so many people own investement properties as LLC's. There are liability advantages as well when running a business/investment as an LLC.

Disclaimer: In no way is the above statement meant as any advice, business or otherwise, and is intended solely for entertainment purposes only.

Yes, most of what you say is true. But, the State of VT is not limiting it only to those people who collect the tax on behalf of the state or those who treat it like a business & form a legal entity. They're now going after houses that should have collected it from the renter because it satisfied whatever definition of "short term rental" the law provides.

That was the point of the article: people owning & renting ski share homes are being surprised with tax bills because the State claims they either should have charged it (the owners) or should have paid it (the renters). They've never had to pay it in the past but due to better enforcement by the State, they're now getting whacked.

You can still write-off business-related expenses even if you haven't formed an LLC, S or C corp. If you own property that has some kind of business purpose, individuals are also entitled to write-off certain expenses.

 

[bigbob]

I found this for the state of Vt: http://www.state.vt.us/tax/businessstarting.shtml

If you rent a room for more than 15 days per calander year you must pay the tax!

Then I found this: http://www.state.vt.us/tax/majorvttaxesmealsandrooms.shtml
Which specifically names hotels as to were the rental applies. So when does a house become a hotel???

 

[madskier6]

I found this for the state of Vt: http://www.state.vt.us/tax/businessstarting.shtml

If you rent a room for more than 15 days per calander year you must pay the tax!

Then I found this: http://www.state.vt.us/tax/majorvttaxesmealsandrooms.shtml
Which specifically names hotels as to were the rental applies. So when does a house become a hotel???

A house becomes a hotel for purposes of collecting meals & rooms tax when you rent it for more than 15 days in any calendar year.

"Note: If you rent your own property 15 or more days a calendar year, you must register and collect tax on all rentals."

You will note it says nothing about whether you are in business to make a profit or whether you are in the hotel or condo renting business.

 

[Lostone]

This was also posted on SkiMRV, and, according to a friend who is a realtor, the long/short term breakpoint is ~30 days. So a seasonal share wouldn't be affected, but guest fees would.

Mind you, free advice is worth every penny you pay for it.