from: dave mason sent: sunday, june 13, 2021 12:19 pm to

From: To: Cc: Subject: Date: Attachments:
Stockwell, Brent David Mason Kuester, Kelli; Pitt, Whitney FW: Short-term Working Group - Ideas on TPT Issues Tuesday, June 15, 2021 7:55:00 AM No Registration V2.pdf No license or Registration V2.pdf
Hi David,
Thank you for providing this. Staff responses are in red below.
Many thanks. Sincerely, Brent Stockwell, ICMA-CM Assistant City Manager 480-312-7288
From: Dave Mason Sent: Sunday, June 13, 2021 12:19 PM To: Stockwell, Brent; Kuester, Kelli Cc: 'Dave Mason' Subject: Short-term Working Group - Ideas on TPT Issues
External Email: Please use caution if opening links or attachments! Hi Brent,
Please find below, some items regarding TPT requirements and STRs. Perhaps this is something that could be considered when looking for possible violations and actions.
1. TPT license is required of STR operators - and that the TPT number must be included in any advertising, including OLM listings for the property - see attached TPT Notice TPN 19-1
· A casual review of a few listings on Airbnb in Scottsdale and PV - none showed TPT numbers *We are educating them as we find them and sending letters (attached examples), however, best way to do this would be to address with the OLM platforms.
2. If an operator/owner has multiple properties, a separate TPT is needed for each one - this should mean multiple TPT violations for multi-unit operators - see attached 42-5005
· This is potentially an educational, revenue, compliance, and enforcement issue *Yes, we will continue to educate via letters to get the contact information to send letters. Most of these property owners are not in town, however for those in town, we could put the info for educating on the utility bill back; seems like a broader issue that OLM platforms could lead this – even just the top 3 (Airbnb, VRBO, Home Away) if we were able to communicate our desire to have this as a mandatory field. (When you “register” your emergency contact with the city for the property we do ask for your TPT registration #, if it is not provided we call and ask for it/educate the property owner.
WEB www.ScottsdaleAZ.gov
Dear Business Owner,
The City of Scottsdale is working to make sure that all Short-Term Rental properties are in compliance with State and Local requirements. We understand that you may be conducting business in Scottsdale renting property on a short - term basis (under 30 days). If you are, it is important that you understand and comply with City and State requirements.
Arizona State Statute requires that all short-term rental owners provide emergency contact information to the city where they are located. Please go to: https://www.scottsdaleaz.gov/codes/vacation-short-term-rentals to provide that information on your property and to find more information on short term rentals in Scottsdale.
Please send an e-mail to [email protected] confirming your compliance with State Statute and City Code or advising us that you do not have a short-term rental property. If applicable, please provide your State transaction privilege tax license number and/or confirmation that you have provided emergency contact information. You may provide that information at: https://www.scottsdaleaz.gov/codes/vacation-short-term-rentals We are here to help if you have any questions, please reach us at 480-312-7788. Thank you for your prompt attention to this matter. Sincerely, The Business Services Team City of Scottsdale
City Treasurer's Office Business Regulations 7447 E. Indian School Rd., Suite 230 Scottsdale, AZ 85251
WEB www.ScottsdaleAZ.gov 06/14/2021
John and Judy doe 1234 N Main St Scottsdale, AZ 85251
Re: 1234 N Main St
The City of Scottsdale is working to make sure that all Short-Term Rental properties are in compliance with State and City requirements. We have information that you may be conducting business in Scottsdale renting property on a short -term basis (under 30 days). If you are, it is important that you understand and comply with City and State requirements.
Arizona State Statute requires that all Short-Term Rentals provide emergency contact information to the city where they are located. Please go to: https://www.scottsdaleaz.gov/codes/vacation-short-term-rentals to provide the emergency contact information for your property and to find more information on short term rentals in Scottsdale.
If you are the owner of a short-term rental you have a transaction privilege (sales) tax and a transient occupancy tax obligation. You will need to have a Transaction Privilege (Sales) Tax License (TPT) from the Arizona Department of Revenue (ADOR) with your Scottsdale (SC) location listed. You are required to file a monthly return, even if the tax on your property is paid by a third party. You can file your return and take a deduction for any portion of your gross receipts that have already been submitted and the taxes paid.
Obtaining a Transaction Privilege (Sales) and Use Tax License with the ADOR:
1. To apply for a new ADOR license, or to add a new location to an existing license, please go to
www.aztaxes.gov
3. You may also contact the ADOR staff at 602-255-3381
City Treasurer's Office Business Regulations
3. There seems to be some STR owner/operator confusion regarding reporting exemption when OLM platforms like Airbnb collect and pay the TPT - When the OLMs collect the tax they send an exemption form to the operator and send statements showing the taxes have been paid - So the operators think they are in compliance and never bother to get a TPT - see attached OLM Reporting.
· This is potentially an educational, revenue, compliance, and enforcement issue *Yes, there is confusion, however, Tax audit department working on educating via letters (approximately 1700 sent out thus far). Currently, the OLM pays ADOR and then each municipality receives a lump sum. We can review the TPT number if listed on the platform, to follow the law but if they have a zero return, city gets nothing besides owner jumping a hoop to follow law.
4. There seems to be a confusion regarding the TPT. It seems that some STR owner/operators,
mistakenly, believe that the OLMs register for TPT numbers since “the OLMs” are “the providers”, and they, “the STR owner/operators”, are essentially “contractors” and not required to obtain an TPT number. Below are some ADOR resources:
https://azdor.gov/transaction-privilege-tax/residential-rental-guidelines https://azdor.gov/sites/default/files/media/PUBLICATION_646A.pdf · This is potentially an educational, revenue, compliance, and enforcement issue
*Yes, we will continue to educate
5. TPT Violations carry a fine of $250 first offense, $1000 subsequent. How can failure to have a TPT be used as a Violation? - If we can use TPT violations, there’s potential revenue to be realized *This would be a fine on the operator (Airbnb/VRBO etc) this Violation would come from ADOR not city. 6. Even if taxes are paid by OLM, STR owners/operators are still responsible to file "$0 TPT Tax Returns" - Probably a very fertile ground for violations here too
· This is potentially an educational, revenue, compliance, and enforcement issue *ADOR does not have the funding to do this type of broad operation for the cities to get us this information; City could utilize ADOR reporting find the ones that are filing but unable to find the ones that are not
7. Should Scottsdale set up a "task force" to monitor listings and report the violations? There would, likely, be thousands, and the information could be reported to ADOR. - This could be a proposed recommendation from the Working Group *Currently set up since beginning of May, 1 Tax Auditor and 1 License inspector working approximately 40-50 hours per week reviewing listings, public comment, referrals, websites etc utilizing ADOR to confirm tax information and sending out letters to encourage “registering” emergency contact with the city or providing information on how to register their STR with ADOR, example letters attached. Follow up of all letters sent after 6 weeks of research (approx. 7/1) will review for compliance, and send information to ADOR concerning the violations if applicable 8. Under the Model City Tax Code and other regulations, can the City charge additional TPT taxes on STRs? I believe it may be able to, but this is certainly worth exploring - see attached 42-6009 - There’s potential revenue * No, in 42-6009.B3 states “must be uniform with all other taxpayers” would have to raise taxes on hotels etc.
If you have any questions, please contact me - direct 703-690-8000. My Personal Best,
David David Mason, Direct Line: 703 690 8000 e-mail: [email protected] Website: www.mason100.com MSIE, BIE, SRES, Realtor Residential, Commercial, Land - Real Estate Services Hundreds of Millions in Sales and Services 39 + Years Real Estate Experience ** Licensed in Arizonia WestUSA Realty, 7077 E. Maryland Rd. Bldg 4, #130, Scottsdale, AZ 85254 Office 480-948-5554
42-5005. Transaction privilege tax and municipal privilege tax licenses; fees; renewal; revocation; violation; classification
A. Every person who receives gross proceeds of sales or gross income on which a transaction privilege tax is imposed by this article and who desires to engage or continue in business shall apply to the department for an annual transaction privilege tax license accompanied by a fee of $12. A person shall not engage or continue in business until the person has obtained a transaction privilege tax license.
B. A person desiring to engage or continue in business within a city or town that imposes a municipal privilege tax shall apply to the department of revenue for an annual municipal privilege tax license accompanied by a fee of up to $50, as established by ordinance of the city or town. The person shall submit the fee with each new license application. The person may not engage or continue in business until the person has obtained a municipal privilege tax license. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes. The fee imposed by this subsection does not apply to a marketplace facilitator or remote seller that is only required to obtain a transaction privilege tax license pursuant to section 42-5043.
C. A transaction privilege tax license is valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year. There is no fee for the renewal of the transaction privilege tax license. The transaction privilege tax license must be renewed at the same time and in the manner as the municipal privilege tax license renewal.
D. A municipal privilege tax license is valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year by the payment of a license renewal fee of up to $50. The renewal fee is due and payable on January 1 and is considered delinquent if not received on or before the last business day of January. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes. The renewal fee imposed by this subsection does not apply to a marketplace facilitator or remote seller that is only required to obtain a transaction privilege tax license pursuant to section 42-5043.
E. A licensee that remains in business after the municipal privilege tax license has expired is subject to the payment of the license renewal fee and the civil penalty prescribed in section 42-1125, subsection R.
F. If the applicant is not in arrears in payment of any tax imposed by this article, the department shall issue a license authorizing the applicant to engage and continue in business on the condition that the applicant complies with this article. The license number shall be continuous.
G. The transaction privilege tax license and the municipal privilege tax license are not transferable on a complete change of ownership or change of location of the business. For the purposes of this subsection:
1. "Location" means the business address appearing in the application for the license and on the transaction privilege tax or municipal privilege tax license.
2. "Ownership" means any right, title or interest in the business.
3. "Transferable" means the ability to convey or change the right or privilege to engage or continue in business by virtue of the issuance of the transaction privilege tax or municipal privilege tax license.
H. When the ownership or location of a business on which a transaction privilege tax or municipal privilege tax is imposed has been changed within the meaning of subsection G of this section, the licensee shall surrender the license to the department. The license shall be reissued to the new owners or for the new
location on application by the taxpayer and payment of the $12 fee for a transaction privilege tax license and a fee of up to $50 per jurisdiction for a municipal privilege tax license. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes.
I. A person who is engaged in or conducting a business in two or more locations or under two or more business names shall procure a transaction privilege tax license for each location or business name regardless of whether all locations or business names are reported on a consolidated return under a single transaction privilege tax license number. This requirement shall not be construed as conflicting with section 42-5020.
J. A person who is engaged in or conducting a business in two or more locations or under two or more business names shall procure a municipal privilege tax license for each location or business name regardless of whether all locations or business names are reported on a consolidated return.
K. A person who is engaged in or conducting business at two or more locations or under two or more business names and who files a consolidated return under a single transaction privilege tax license number as provided by section 42-5020 is required to pay only a single municipal privilege tax license renewal fee for each local jurisdiction pursuant to subsection D of this section. A person who is engaged in or conducting business at two or more locations or under two or more business names and who does not file a consolidated return under a single license number is required to pay a license renewal fee for each location or license in a local jurisdiction.
L. For the purposes of this chapter and chapter 6 of this title:
1. Through December 31, 2018, an online lodging marketplace, as defined in section 42-5076, may register with the department for a license for the payment of taxes levied by this state and one or more counties, cities, towns or special taxing districts, at the election of the online lodging marketplace, for taxes due from an online lodging operator on any online lodging transaction facilitated by the online lodging marketplace, subject to sections 42-5076 and 42-6009.
2. Beginning from and after December 31, 2018, an online lodging marketplace, as defined in section 42- 5076, shall register with the department for a license for the payment of taxes levied by this state and one or more counties, cities, towns or special taxing districts for taxes due from an online lodging operator on any online lodging transaction facilitated by the online lodging marketplace, subject to sections 42-5076 and 42- 6009.
M. For the purposes of this chapter and chapter 6 of this title, a person who is licensed pursuant to title 32, chapter 20 and who files an electronic consolidated tax return for individual real properties under management on behalf of the property owners may be licensed with the department for the payment of taxes levied by this state and by any county, city or town with respect to those properties. There is no fee for a license issued pursuant to this subsection.
N. If a person violates this article or any rule adopted under this article, the department upon hearing may revoke any transaction privilege tax or municipal privilege tax license issued to the person. The department shall provide ten days' written notice of the hearing, stating the time and place and requiring the person to appear and show cause why the license or licenses should not be revoked. The department shall provide written notice to the person of the revocation of the license. The notices may be served personally or by mail pursuant to section 42-5037. After revocation, the department shall not issue a new license to the person unless the person presents evidence satisfactory to the department that the person will comply with this article and with the rules adopted under this article. The department may prescribe the terms under which a revoked license may be reissued.
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O. The department may revoke any transaction privilege tax or municipal privilege tax license issued to any person who fails for thirteen consecutive months to make and file a return required by this article on or before the due date or the due date as extended by the department unless the failure is due to a reasonable cause and not due to wilful neglect.
P. A person who violates any provision of this section is guilty of a class 3 misdemeanor.
42-6009. Online lodging; definitions
A. Except as provided by this section, a city, town or other taxing jurisdiction may not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on the business of operating an online lodging marketplace or, in the case of an online lodging marketplace that is licensed pursuant to section 42-5005, subsection L, on any online lodging transaction facilitated by the online lodging marketplace or on any online lodging operator with respect to any online lodging transaction for which it has received documentation that the online lodging marketplace has remitted or will remit the applicable tax to the department pursuant to section 42-5014, subsection E.
B. In the case of an online lodging marketplace that is licensed pursuant to section 42-5005, subsection L, a city, town or other taxing jurisdiction may levy a transaction privilege, sales, use, franchise or other similar tax or fee on an online lodging marketplace from any activity subject to tax under the model city tax code, with the tax base for an online marketplace being limited pursuant to section 42-5076, subject to the following conditions:
1. The city, town or other taxing jurisdiction tax must be administered in a manner that is uniform with the treatment of online lodging marketplaces, online lodging operators and online lodging transactions provided by chapter 5 of this title, except that:
(a) The city, town or other taxing jurisdiction tax rate may be different from the state tax rate prescribed by section 42-5010.
(b) The city, town or other taxing jurisdiction tax may apply to online lodging transactions involving rentals of lodging accommodations in the city, town or other taxing jurisdiction for more than twenty-nine consecutive days. With respect to any tax on rentals of lodging accommodations for more than twenty-nine consecutive days, in the case of an online lodging marketplace that has registered pursuant to section 42- 5005, subsection L, the city, town or other taxing jurisdiction tax must uniformly apply to all lodging accommodations in the city, town or other taxing jurisdiction for thirty consecutive days or more, and the tax base for the tax must be limited exclusively to online lodging transactions facilitated by an online lodging marketplace for rentals of lodging accommodations for thirty consecutive days or more and located in the applicable city, town or other taxing jurisdiction.
2. The city, town or other taxing jurisdiction tax shall be administered, collected and enforced by the department and distributed to the city, town or other taxing jurisdiction in a uniform manner.
3. The city, town or other taxing jurisdiction tax imposed on online lodging marketplaces and online lodging operators must be uniform with all other taxpayers engaging in the same activity within the jurisdictional boundaries of the city, town or other taxing jurisdiction.
4. Any city, town or other taxing jurisdiction tax is subject to:
(a) Section 42-6002, relating to audits.
(b) Section 42-2003, subsection X, relating to confidential information.
(c) Section 42-5003, subsection B, relating to judicial enforcement.
(d) Section 42-5005, subsection L, relating to registration of online lodging marketplaces.
(e) Section 42-5014, subsection E, relating to tax returns.
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5. The city, town or other taxing jurisdiction tax may not be collected from an online lodging operator with respect to any online lodging transaction or transactions for which the online lodging operator has received written notice or documentation from a registered online lodging marketplace that it has remitted or will remit the applicable city, town or other taxing jurisdiction tax with respect to those transactions to the department pursuant to section 42-5014, subsection E.
C. For the purposes of this section, "lodging accommodations", "online lodging marketplace", "online lodging operator" and "online lodging transaction" have the same meanings prescribed in section 42-5076.
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Online Lodging Marketplace Guidelines
Effective Jan. 1, 2019, all online lodging marketplaces (OLM) are required to register to file and pay on all online lodging transactions with the department. An online lodging marketplace is any digital platform that provides, at a cost, an unaffiliated third party with a platform to rent lodging accommodations.
Arizona Department of Revenue (ADOR) has created a notice to identify the different online platforms used by owners to list short term rentals and whether these online platforms are required to register with ADOR as an online lodging marketplace to collect and remit transaction privilege taxes (TPT) from online lodging transactions received from the short term rentals in Arizona.
Download TPN 19-1
Reporting Transactions
Depending on the type of business, there are different reporting requirements. Please click on the factsheet to determine the reporting requirements of each type of business.
OLM
This is a third-party online lodging marketplace that list properties for rent and collects the full amount charged by the operator for accommodations booked by the customer.
Owner/Operator/Property Manager
The owner of the property is called the operator in the OLM business classification. A property management company contracts with the operator of a property located in Arizona to provide property management services, marketing of the property, and rent collection, of short-term rental properties all for a fee.
Class One Property Owners (mainly hotels)
This business rents lodging accommodations classified as class one property for property tax purposes under A.R.S. §42-12001. This is mainly hotels but not apartment buildings.
Download Online Lodging Marketplace Reporting Factsheet
Exemption Certificates
There are two exemption certificates to be used to document the non-taxable transactions in the online lodging marketplace business classification.
Form 5018 is completed by the OLM and given to the owner of the property (operator) to document that the OLM has or will remit the tax on the lodging accommodation to the department. Both the OLM and the operator will keep copies of this document.
Form 5019 is completed by the class one property owner and is given to the OLM. This documents that the class one property owner has or will submit the tax on the lodging accommodation to the department. Both the OLM and the class one property owner will keep copies of this document.
For further assistance, please email [email protected].
NOTICE: AZTaxes.gov, AZFSet, and Debt Set Off (DSO) will be unavailable due to scheduled maintenance on Saturday, June 12 from 12:00 a.m. through Sunday, June 13 at 6:00 a.m. We apologize for any inconvenience.
Customer Notice: Due to COVID-19, ADOR's in-person lobby services are by appointment only and in compliance with local municipal and county face covering policies.
Douglas A. Ducey Governor
Carlton Woodruff Interim Director
ARIZONA TRANSACTION PRIVILEGE TAX NOTICE
TPN 19-1
January 22, 2019 (Modified July 22, 2019)
Pursuant to A.R.S. 42-6005(B), when the state statutes and Model City Tax Code are the same and where the department has issued written guidance, the department's interpretation is binding on cities and towns. In all other situations, interpretation of the Model City Tax Code is the purview of the city group assigned for that purpose.
THIS TPN APPLIES FOR STATE, COUNTY AND CITY TAX PURPOSES.
Purpose:
The purpose of this notice is to identify the responsibilities of an online lodging marketplace (OLM) and property owners engaging in the rental of lodging accommodations using online platforms to list short-term and long-term property rentals. This TPN will assist in the determination of whether these online platforms are required to register with the Department of Revenue (department) as an OLM for collecting and remitting transaction privilege taxes (TPT) from online lodging transaction income received from the short-term and long-term rentals in Arizona.
Short-term rentals are defined as rentals that are for less than 30 days. Long-term rentals are defined as lodging accommodations for 30 consecutive days or more.1 For purposes of this notice, properties classified as class one properties for property tax purposes are not included.2 Also, for state and county tax purposes, OLMs are taxable only on short-term rentals though they may be taxable by some municipalities for long-term purposes as well.
An OLM is any digital platform that provides, at a cost, an unaffiliated third party with a platform to rent lodging accommodations. See Arizona Revised Statutes (A.R.S.) § 42- 5076(E)(1).
A.R.S. § 42-5076, OLM classification, imposes TPT on the business of operating an OLM. The tax base for the OLM classification is the gross proceeds of sales or gross income derived from the business measured by the total amount charged for an online transient lodging transaction by the online lodging operator (operator). All OLMs are required to
1 The State of Arizona does not tax long term property rentals; some municipalities do impose a tax on this activity. 2 Class one properties are classified as commercial properties for property tax purposes in most cases.
ARIZONA TRANSACTION PRIVILEGE NOTICE
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register with the department after December 31, 2018, and remit TPT for all taxing jurisdictions.3
A.R.S. § 42-6009 provides that a city or town may levy a TPT on an OLM from any activity subject to tax under the Model City Tax Code (MCTC). Thus, cities may assess taxes on an OLM’s short-term rentals as well as rentals of lodging accommodations within any city or town for more than twenty-nine (29) consecutive days (long-term rentals).
Analysis and Discussion:
There are several different types of online platforms used by operators to list their properties. This notice includes information related to short-term and long-term property rentals.
Third-party Marketplaces:
Third-party marketplaces provide a digital platform for unaffiliated operators to list their properties for rent. Operators can provide details about their processes and conditions on the platform. The online platform makes a commission and/or listing fee on the rental from the operator.
Online Lodging Marketplaces (OLM)
OLMs list properties for rent and collect the full amount charged by the operator for accommodations booked by the customer. Companies that fall under this category meet the definition of an OLM and are required to register with the department pursuant to A.R.S. § 42-5005 and §42-5076 for TPT (state, county, and city) collection and remittance purposes. Note: certain counties do not impose a tax on OLMs, so the operator may notice a different tax rate on the report the OLM provides to it.
See OLM Example 1 in the Appendix for more information.
Operator (Merchant) Marketplaces:
These are online marketplaces where the operator directly markets properties on its website. Companies that fall under this category do not meet the definition of an OLM and are not required to register with the department pursuant to A.R.S. § 42-5005 and §42-5076 for TPT (state, county, and city) collection and remittance purposes. Since it is the operator who is directly operating the website and offering its properties, the operator is responsible for taxes
3 SB 1382, signed by the Governor on April 11, 2018, requires all OLMs to register with the Department after December 31, 2018.
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under the transient lodging classification, A.R.S. § 42-5070 for the State, unless another deduction applies.4 The operator is also responsible for reporting taxes under the hotel classification (additional hotel, if applicable) for the cities.
See Operator (Merchant) Marketplace Example 2 in the Appendix for more information.
Property Management:
In this model, a company provides property management services to operators and lists the properties on its website. Services provided by property management companies can include online marketing and listing the property, property maintenance and housekeeping, collection of rent and deposits, and inquiries from tenants. Companies that fall under this category do not meet the definition of an OLM because they are directly operating the website and offering the properties they manage on their website. These companies are not required to register as OLMs with the department pursuant to A.R.S. §42-5076 for state or city tax collection and remittance purposes. However, they are responsible for collecting and remitting taxes under the transient lodging classification for the State, A.R.S. § 42-5070 5 and the hotel (additional hotel, if applicable) and residential rental tax for the cities under the MCTC.
Many real estate companies also provide property management services to operators and list properties on their websites. Services provided by these real estate companies can include online marketing and listing the property on their website, property management, collection of rent and deposits, and inquiries from tenants. As noted above, these companies provide property management services to short-term and long-term rental property owners and do not meet the definition of an OLM because they are directly operating their websites and offering the properties they manage on their websites. These companies are not required to register with the department as OLMs pursuant to A.R.S. §42-5076 for state tax collection and remittance purposes. However, they are responsible for collecting and
4 For example, A.R.S. § 42-5070(B)(3) provides that the transient lodging classification does not include leasing or renting four or fewer rooms of an owner-occupied residential home, together with furnishing no more than a breakfast meal, to transient lodgers at no more than fifty percent average annual occupancy rate (this deduction does not apply to municipalities under the MCTC). 5 A.R.S. § 42-5070(A) defines Transient Lodging as the business of operating, for occupancy by transients, a hotel or motel, including an inn, tourist home or house, dude ranch, resort, campground, studio or bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location or other similar structure, and also including a space, lot or slab that is occupied or intended or designed for occupancy by transients in a mobile home or house trailer furnished by them for such occupancy.
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remitting taxes under the transient lodging classification, A.R.S. § 42-5070 for the state and county and the hotel (additional hotel, if applicable) and residential rental tax for the cities under the MCTC. See the filing example under Operator (Merchant) Marketplaces in the Appendix. Note: As a property management company, the tax base includes the fees charged by the management company for their services to the owner.
If the real estate company is only providing an online platform for an operator to list a property and is collecting a fee for the listing, then refer to the third-party marketplace analysis above to determine if the company is required to register with the department pursuant to A.R.S. § 42-5005 and § 42-5076 for TPT collection and remittance purposes as an OLM.
See Property Management Company Examples 3, 4, and 5 in the Appendix for more information.
Lodging Accommodations on Reservations Owned by Native Americans
Generally, where a lodging accommodation is owned by a Native American and the accommodation is located on the reservation for which the tribe is established, the gross receipts derived from the rental of that accommodation is not taxable for TPT purposes. If the Native American owner lists that accommodation on an OLM, the OLM is required to remit taxes on behalf of the owner. However, the rental of such an accommodation is not taxable if the accommodation is not listed on the OLM. Therefore, the income derived from such accommodations owned by a Native American and listed by that Native American on an OLM is also not subject to TPT.
The Native American will give an exemption certificate (Form 5018-R)6 to the OLM that documents the ownership of the lodging accommodation located on the reservation of which the Native American is a member.
Advertising Marketplace:
These are companies that use a cost-per-click process or may charge a flat fee. This advertising model is used to direct traffic to websites in which advertisers pay when the ad is clicked. Advertising marketplaces do not meet the definition of an OLM and are not responsible for registering with the department pursuant to A.R.S. § 42-5005 and §42-5076. Advertising is not taxed at the state or county levels. However, cities and towns in Arizona may impose TPT on the business of local advertising. See the MCTC § -405 for more information on the advertising classification.
6 This form is available on the department’s website.
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See Advertising Marketplace Example 6 in the Appendix for more information.
Other Online Marketplaces:
In this model, a company provides an online platform for an operator to post their properties. These online marketplace platforms do not provide any other services other than allowing the owner to list their property. Also, they do not receive any compensation from the operator. Thus, these marketplaces do not meet the definition of an OLM and are not be required to register with the department pursuant to A.R.S. § 42-5005 and §42-5076. The operator is the responsible party to license, file and remit the taxes.
See Other Online Marketplaces Example 7 in the Appendix for more information.
Internet-Based Travel Companies
These third-party marketplaces are internet-based travel companies that primarily book hotel rooms. This business model may also bundle airfares, rental cars, and/or other services. Companies that fall under this category may not be required to register with the department pursuant to A.R.S. § 42-5005 and §42-5076 for state tax collection and remittance purposes if they primarily provide lodging accommodations for properties that are classified as Class One Properties for property tax purposes and do not engage in OLM activity.
See Internet-Based Travel Companies Example 8 in the Appendix for more information.
Other Considerations:
Licensing for Owners/Operators: An online lodging operator or short-term/vacation properties may not offer for rent or rent a lodging accommodation without first obtaining a current TPT license. This is true whether or not the owner or operator offers the accommodation through an OLM. Additionally, long-term property owners are required to be licensed in those cities that impose a privilege tax on residential rentals. Please see the MCTC for more information.
Operators should note that from and after August 27, 2019, penalties are imposed for not obtaining a TPT license or displaying that license on any advertisement, including OLM postings (even if an operator is listing their property only on an OLM website they still obtain a TPT license). If the property is advertised through an OLM, the operator must be able to substantiate that they gave the OLM their current TPT license number. A total of $250 will be assessed for a first offense and $1,000 for any subsequent offense. Operators should
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also be aware that additional penalties will be assessed for failure to comply with city or county ordinances where there is a final adjudication of an ordinance violation. Those penalties range from $500 to half of the gross monthly revenues of the accommodation where the violation occurred or $1,500, whichever is greater.
Operators that book ONLY through an OLM are still obligated to file a tax return showing the gross receipts received from the OLM with a deduction equal to the amount received from the OLM (deduction code 775). This return should be filed on AZTaxes.gov and the operator may elect to report on an annual basis.
Explanatory Notice
The purpose of a tax notice is to provide general guidance to assist taxpayers in
becoming familiar with Arizona tax laws. A tax ruling is intended to encompass issues
of law that are not adequately covered in statute, case law or administrative rules, but
are not intended to address complex issues in detail or to address a taxpayer’s
specific circumstance. The relevant statute, case law, or administrative rules, as well
as a subsequent notice, may modify or negate any or all of the provisions of any tax
notice. If the information in a notice is shown to be erroneous and a taxpayer shows
reasonable reliance on that information, the taxpayer is liable for any tax or interest
which may result from the erroneous advice, but no penalties will be imposed. See
GTR 08-1 for more detailed information regarding documents issued by the
Department of Revenue.
OLM Example:
Example 1: An operator lists their property located in Arizona on a third-party marketplace digital platform, and the third-party marketplace collects rental payments from the customer on behalf of the operator.
Result: The third-party marketplace meets the definition of an OLM by collecting rental payments on behalf of the operator. The third-party marketplace is required to register with the department pursuant to A.R.S. § 42-5005 and § 42-5076 for TPT collection and remittance purposes for taxes due on any online lodging transaction it facilitates. The online lodging transaction is the charge to the occupant, including a transient as defined in A.R.S. § 42-5070. By definition, these transactions do not include fees the OLM may separately charge in addition to those charged by the operator. Furthermore, the third-party marketplace is not responsible for reporting income derived from lodging accommodations classified as class one property for property tax purposes under A.R.S. § 42-12001. This income is documented with an exemption certificate (Form 5019)7 received by the OLM from the class one property owner and deducted from the tax base. The OLM is required to report by jurisdiction pursuant to A.R.S. § 42-5014(E)(2).
Filing Example of OLM with class one property receipts
FACTS RESULT
Taxable unless there is an available deduction.
Gross receipts from class one properties of $15,000 (included in total gross receipts)
Deducted by OLM and reported by class one property owner under transient lodging classification
OLM has multiple listings in multiple locations Reported by jurisdiction for state/county and city purposes.
Other short-term lodging accommodations included
Included in gross receipts; reported under code 325 (OLM transaction) for state/county and 044 and 144 for cities (hotel and additional hotel)
Gross receipts include other fees charged by the operator including cleaning fees, security fees, additional guest fees
Fees charged by the owner included in OLM gross receipts and taxable
OLM separately charges for its fees in addition to the amount charged by the owner for rental.
OLM fees may only be excluded if separately charged on the invoice from the owner’s lodging charges
7 This form is available on the department’s website
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For simplicity, all lodging occurred in the City of Phoenix, Maricopa County, and no other deductions are addressed.
The reported deductions for the City of Phoenix and Maricopa County:
Operator (Merchant) Marketplaces Example: Example 2: An operator of three homes located in Arizona creates a website to market its properties, and customers can book the properties directly on the website for short-term and long-term purposes. The operator also markets the properties on an OLM website and receives revenue from bookings through the OLM website.
Result: Since it is the operator who is directly operating the website and offering its properties, the operator is responsible for taxes under the transient lodging classification, A.R.S. § 42-5070 for the state/county, unless an applicable deduction applies.8 The operator will also be responsible for reporting taxes under the hotel classification (additional hotel if
8 For example, A.R.S. § 42-5070(B)(3) provides that the transient lodging classification does not include leasing or renting four or fewer rooms of an owner-occupied residential home, together with furnishing no more than a breakfast meal, to transient lodgers at no more than fifty percent average annual occupancy rate.
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applicable) for the cities. Should the operator accept bookings for lodging stays longer than 29 consecutive days, the operator is also responsible for taxes under the residential rental classification for city tax purposes. Long-term rentals are not taxed at the state or county levels but may be for municipalities. In addition, since the operator also markets its properties on OLMs, A.R.S. § 42-5070(C)(2) provides a deduction for “[t]he gross proceeds or gross income received” from a registered OLM if the operator has received documentation from the registered OLM that the OLM will remit the tax. The OLM is responsible for remitting the applicable tax to the department for the online transient lodging transactions as well as the online residential rental transactions for the municipalities. Note: Some counties do not impose a tax on OLMs so the operator may notice a difference in the taxes the OLM reports.
Filing Example of Operator with receipts from OLM
FACTS RESULT
Operator’s total gross receipts of $8,300
All receipts from the operator’s website taxable under transient lodging classification (state/county). The gross receipts are reported by location at the city level, and the operator is taxable under hotel additional hotel, if applicable unless available deduction exists.
Gross receipts from OLM $3,500 for short-term stays (included in total gross receipts)
Reported by OLM; OLM provides exemption certificate (Form 5018)9 to operator; operator deducts the amount from its gross receipts (code 775). Note: Some counties do not impose a tax on OLMs, so the operator may notice a different tax rate on the report the OLM provides to it.
Gross receipts from OLM $2,000 for long-term stays (included in total gross receipts)
Reported by OLM; OLM provides exemption certificate (Form 5018) to operator; operator deducts the amount from its gross receipts (code 776); NOT reportable at state/county levels, but may be taxable by a city. Note: Some counties do not impose a tax on OLMs so the operator may notice a different tax rate on the report the OLM provides to it.
Gross receipts from its direct short-term bookings $2,800 (included in gross receipts)
Reported by operator under transient lodging classification.
9 This form is available on the department’s website
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For simplicity, the transactions occurred in three properties located in the City of Tempe, Maricopa County. No other deductions are addressed other than the one discussed here. Operator Filing Example
Operator Filing Example The Reported Deductions for the State/Maricopa County and the City of Tempe:
OLM Filing Example-Reporting gross receipts on behalf of operator
Property Management Company Examples:
Example 3: A property management company contracts with the operator of a property located in Arizona to provide property management services, marketing of the property, and rent collection of short-term and long-term rental properties all for a fee. The property management company lists the property on its website.
Result: The property management company does not meet the definition of an OLM because the property is not listed by an unaffiliated third-party, and the property management company is itself leasing and managing the property. The operator has contracted with the property management company to provide property management, which includes marketing of the property. However, the property management company is responsible for collecting and remitting taxes under the transient lodging classification, A.R.S. § 42-5070 for the state and county purposes, and the hotel (additional hotel, if applicable) and residential rental tax for the cities under MCTC §§-100 and -445. Note: As a property management company, the tax base includes the fees charged by the property management company for their services to the owner.
Example 4: A property management company contracts with the operator of a property located in Arizona to provide property management services, marketing of the property, and rent collection all for a fee. The property management company lists the property on its website for short-term and long-term rentals. In addition, the property management company lists the property on third-party marketplaces/OLMs.
Result: The property management company does not meet the definition of an OLM. However, because the property management company is also listing the property on a third- party marketplace, then the third-party marketplace is required to register with the department pursuant to A.R.S. § 42-5005 and § 42-5076 as an OLM for TPT collection and remittance purposes. Please refer to the third-party marketplace analysis above.
Example 5: A real estate company contracts with an operator located in Arizona to provide property management services, marketing of the property, and collects lodging accommodation fees for short-term and long term rentals all for a fee. The real estate company lists the property on its website.
Result: The real estate company does not meet the definition of an OLM because the property is not listed by an unaffiliated third-party. The operator has contracted with the real estate company to provide property management, and that includes marketing of the property. However, they are responsible for collecting and remitting taxes under the transient
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lodging classification, A.R.S. § 42-5070 for the state and the hotel (additional hotel if applicable) and residential rental tax for the cities under MCTC §§ -100 and -445. See the filing example under Operator (Merchant) Marketplaces. Note: As a property management company, the tax base includes the fees charged by the management company for their services to the owner.
Advertising Marketplace example:
Example 6: Company provides an online platform for third-party OLMs to list rental information. When a customer clicks on a desired property in Arizona, they will be redirected to the third-party OLM website responsible for the listing and the online advertising company will receive a fee when the ad is clicked regardless if it leads to a booking.
Result: Online advertising companies that fall under this model do not meet the definition of an OLM and are not responsible for registering with the department pursuant to A.R.S. § 42-5005 and §42-5076 for TPT collection and remittance purposes. Online advertising marketplaces only direct potential renters to the actual third-party OLM website responsible for the listing. Please note, however, online advertising companies may be required to register with the department for city tax collection purposes. Please see the MCTC § -405 for more information.
Other Online Marketplace Example:
Example 7: An owner lists their property located in Arizona on an online advertising platform. The operator does not need to pay for this service. The listing includes contact information for the operator. When a customer wants to book the property, they contact the operator directly using the information provided on the platform.
Result: Companies that fall under this model do not meet the definition of an OLM and are not responsible for registering with the department pursuant to A.R.S. § 42-5005 and § 42- 5076 for TPT collection and remittance purposes. However, the property owner is responsible for reporting any applicable taxes as a result of renting their property. In addition, the online advertising company may be responsible for collecting and remitting city taxes.
Internet Travel Based Company Example:
Example 8: An operator sells or contracts to provide a block of rooms in their property located in Arizona to an Internet-Based Travel Company for a reduced price. The operator’s property is classified as class one property for property tax purposes. The third-party
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marketplace rents it for a higher price. They may also provide rental car services or airfare services.
Result: The Internet-Based Travel Company provides lodging accommodations for properties classified as class one properties for property tax purposes. Under A.R.S. §42- 5076, an Internet-Based Travel Company is not required to report and remit income derived from the rental of class one properties. Instead, the owners of these types of properties are required to report and remit any applicable state, county and city taxes.
Should the Internet-Based Travel Company provide accommodations for properties not classified as class one property, they will be required to be registered to file and remit any tax on those transactions and deduct the revenue received from class one properties.
City Treasurer's Office Business Regulations 7447 E. Indian School Rd., Suite 230 Scottsdale, AZ 85251
WEB www.ScottsdaleAZ.gov 06/14/2021
John and Judy doe 1234 N Main St Scottsdale, AZ 85251
Re: 1234 N Main St
The City of Scottsdale is working to make sure that all Short-Term Rental properties are in compliance with State and City requirements. We have information that you may be conducting business in Scottsdale renting property on a short -term basis (under 30 days). If you are, it is important that you understand and comply with City and State requirements.
Arizona State Statute requires that all Short-Term Rentals provide emergency contact information to the city where they are located. Please go to: https://www.scottsdaleaz.gov/codes/vacation-short-term-rentals to provide the emergency contact information for your property and to find more information on short term rentals in Scottsdale.
If you are the owner of a short-term rental you have a transaction privilege (sales) tax and a transient occupancy tax obligation. You will need to have a Transaction Privilege (Sales) Tax License (TPT) from the Arizona Department of Revenue (ADOR) with your Scottsdale (SC) location listed. You are required to file a monthly return, even if the tax on your property is paid by a third party. You can file your return and take a deduction for any portion of your gross receipts that have already been submitted and the taxes paid.
Obtaining a Transaction Privilege (Sales) and Use Tax License with the ADOR:
1. To apply for a new ADOR license, or to add a new location to an existing license, please go to
www.aztaxes.gov
3. You may also contact the ADOR staff at 602-255-3381
WEB www.ScottsdaleAZ.gov
The City of Scottsdale is working to make sure that all Short-Term Rental properties are in compliance with State and Local requirements. We understand that you may be conducting business in Scottsdale renting property on a short - term basis (under 30 days). If you are, it is important that you understand and comply with City and State requirements.
Arizona State Statute requires that all short-term rental owners provide emergency contact information to the city where they are located. Please go to: https://www.scottsdaleaz.gov/codes/vacation-short-term-rentals to provide that information on your property and to find more information on short term rentals in Scottsdale.
42-5005 - TPT Fees, Renewal, violation Highlight
42-6009 - Online lodging; definitions Highlight
OLM Reporting - Exemption 5018
No license or Registration V2
City Treasurer's Office Business Regulations
No Registration V2

from: dave mason sent: sunday, june 13, 2021 12:19 pm to

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