D.C. Residents Renting Homes for Inauguration Day Have No Sales Tax Worries

January 19, 2009

The streets around the Tax Foundation’s office, and a large portion of the rest of Washington, D.C., are filled with out-of-town visitors today, here for Inauguration Day tomorrow. While everyone in the country will be waiting with bated breath to see what tax policies Obama will try to implement in the coming four years, some D.C. residents and their guests have a more pressing tax-related concern right now: sales taxes on lodging. With so many visitors flooding the area and looking for short-term lodging, some D.C. residents have decided to rent their houses, apartments, or rooms for the day.

Washingtonians who rent their homes to tourists just for that one day need not worry, though: in November the D.C. Office of Tax and Revenue issued a press release announcing that those who rent lodgings to out-of-town visitors just for Inauguration Day will not have to pay sales taxes.

From the press release:

Tax and Revenue Offers Tax Guidelines on Property Rentals for Inauguration Day

The District of Columbia Office of Tax and Revenue (OTR) today announced tax guidelines for individuals and businesses who will be renting properties to out-of-town visitors for the events surrounding Inauguration Day, January 20, 2009. These Sales and Use and Unincorporated Franchise tax guidelines apply to the rental of houses, English basements, condominiums, apartments, and like dwellings.

Sales and Use: The District’s sales tax, at the rate of 14.5 percent, applies to any charges for lodging regularly furnished to transients. The tax is not applicable to charges for lodging if it is provided on a one-time basis for the Inauguration celebration.

Unincorporated Franchise Tax: Individuals and unincorporated businesses operating in the District of Columbia with gross income from business activities of more than $12,000 per year, including any receipts for transient accommodations, are required to file an annual D-30 Unincorporated Business Franchise Tax return by April 15th of each year.

District residents renting transient accommodations for the Inauguration celebration who are not required to file the D-30 are also not required to report their receipts as gross income for District of Columbia income tax purposes to the extent they are not required to report such income for federal income tax purposes.

While some visitors and residents are no doubt happy to hear about the suspension of this tax, targeted, short-term tax breaks—whether for Inauguration Day, for the back-to-school sales tax holidays that some states have, or for the gasoline tax holidays that some policymakers have proposed—tend to complicate the tax code and cause more harm than good.

However, after tomorrow, we’ll be more concerned with the long-term tax policies of the next four years, so stay tuned to the Tax Foundation’s Tax Policy Blog.

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