How do Wisconsin Municipalities Collect Taxes from Airbnb and Other Home Rental Companies?

Unlike the popular home-renting service Airbnb, which returned hundreds of thousands of dollars to Madison and the state of Wisconsin in the first year of a tax collection agreement, similar companies leave tax payment up to individual property owners.

Under voluntary agreements with Madison, Airbnb returned $324,000 in room tax revenue in the first year of payments. The company returned $2.5 million to the state of Wisconsin over the first year of its agreement.

However, other major players in the home rental business, like Homeaway and VRBO (both owned by Expedia), do not charge the required local taxes up front. Hosts who use these platforms are responsible for collecting and returning local taxes to the municipality.

Under Wisconsin law, people renting out rooms to the public for periods of less than one month are responsible for collecting and paying short-term lodging sales tax. The state only requires companies that have a nexus, or a connection between a seller and the state, to collect tax on sales made in Wisconsin.

Activities that create a nexus in Wisconsin include:

  • A physical presence or employees on the property.
  • The delivery of products into Wisconsin in company-owned vehicles.
  • Selling, servicing, repairing or installing products.
  • Performing construction activities or other services.