Relying on major platforms like Airbnb and Vrbo to collect Transient Occupancy Tax (TOT) could be hurting your community’s bottom line.
The global short-term rental (STR) property market is estimated to be worth a whopping $124.6 billion in 2024 and this number is expected to cross $447.9 billion by 2037. More than 40% of the world’s STRs are in North America.
As the STR market continues to grow, the revenue collected from Transient Occupancy Taxes (TOT) remits can make a significant difference to local American communities.
But how local government teams manage STRs and ensure tax compliance matters. Placer County in California, for example, increased its TOT collections by more than 75% when it upgraded its STR management platform.
Why lump sum TOT payments can reduce potential tax revenue
Big hosting platforms like Airbnb, Booking.com, Vrbo offer to handle TOT collections on behalf of governments. It might seem like a simple solution, especially to local government teams with limited resources. But the fact is that the lump sum tax payments offered by the hosting platforms often mean less revenue for your community. Here’s why:
- No visibility on compliance: Lump sum payments come with no detailed breakdown of the taxes paid on individual properties. Without specifics, it's impossible to verify which properties are paying correctly and which are not. The lack of detailed data can also make it harder to distribute tax revenue correctly once it has been collected.
- Unverified exemptions: Many platforms allow hosts to self-report their tax status, meaning properties can be incorrectly marked as tax-exempt. Since local governments lack access to detailed data, these claims often go unchallenged, resulting in lost revenue.
- Off-platforms bookings: Not every STR property is advertised solely on the major platforms, and many bypass hosting platforms entirely, with renters paying hosts directly. These direct transactions are not captured in the lump sum payments, meaning your community misses out on collecting TOT from many bookings. Worse still, without detailed data, your team may never know about this missing revenue.
Better transparency, better results
The key to effective STR management is accurately knowing what’s happening in your community. Without accurate, real-time data on property compliance, local government teams can’t enforce regulations or optimize tax collection. Relying on lump sums from hosting platforms removes the detail that makes STR tax collection accurate, efficient and fair, and can leave communities without the revenue they need to support local services.
But with limited resources, local government teams need STR software that not only provides the detailed data they need, but also streamlines and simplifies the tax collection process to improve compliance and reduce administration work.
"For local governments, the key to effective short-term rental management isn't just about collecting taxes—it's about transparency and accountability. If you can’t see it, you can’t manage it”, says Deckard Technologies CEO Nick Del Pego.
“By prioritizing access to real-time, accurate information, local government teams can ensure compliance, optimize revenue, and ultimately create a more sustainable balance between tourism and local needs.".
Streamline short-term rental compliance with smart tools
Not all STR compliance tools are created equal. As the STR market expands, local governments need a modern, automated platform that can keep up and provide detailed insights into STR activity. Rentalscape by Deckard Technologies offers just that, using AI to gather information from more than 10,000 online sources and provide real-time data that’s easy to access and act on.
With Rentalscape, government teams can:
- Access detailed compliance data: Identify which properties are paying TOT, which claim exemptions, and which are not registered
- Gain real-time insights: Track bookings, host earnings, and permit statuses, ensuring no property slips through the cracks.
- Automate compliance checks: Resolve overdue taxes and non-compliance issues quickly, without the need for time-consuming manual reviews.
In addition, Rentalscape’s Tax Payment Portal option streamlines the calculation, collection and payment of STR-related taxes like TOT, with automatic calculation of taxes due, as well as late fees and penalties. Customized for individual communities, the portal’s user-friendly public interface also makes it easier for property owners to pay tax correctly.
Rentalscape brings visibility and precision to STR management. With Rentalscape, local government teams can streamline operations, enforce compliance, maximize revenue, and make informed decisions that achieve more for their communities.
