Airbnb Hosts & Short-Term Rental Taxes in Hilton Head, SC
Hilton Head is one of the most classic beach getaways still left in the United States. Thanks to strict laws preventing the development of large buildings and restrictions on other things like street lights, Hilton Head still has an element of untouched charm. Long white sand beaches extend in every direction and temperate weather, especially in summers, welcome guests from around the country. But that isn’t to say that the island isn’t without an impressive amount of development. Resort-style hotels with all-inclusive packages have long reigned supreme in these parts but with the popularization of short term rentals, platforms like Airbnb have been making waves in the market. From beachfront properties to private residential communities, homeowners (many of which are just seasonal residents) have been marketing their homes for an extra dollar.
Currently, the Hilton Head market has close to 3,600 Airbnb listings, the majority of which are entire home listings. By having such a high proportion of entire homes, Hilton Head benefits from relatively high Average Daily Rates (ADR), which recently peaked at $238 in July. And higher ADRs obviously help with strong gross revenues and make Hilton Head Island one of the strongest markets in South Carolina.
Figure 1 – Airbnb listings in Hilton Head Island
Figure 2 – Average Daily Rate (ADR) for Airbnb listings in Hilton Head Island
Figure 3 – Airbnb host gross revenues in Hilton Head Island
Figure 4 – Occupancy rates for Airbnb listings in Hilton Head Island
Short-Term Rental Regulations in Hilton Head
While the state of South Carolina taxes short term rentals, the city’s local government has charges of their own. And while there are extra taxes, the overall regulations facing hosts and their online platforms are not overly restrictive. For example, unlike many places in the country, the city does not have any regulations that require hosts to be on-premise or limits the number of days a property can be rented or restricts guest numbers or requires a rental property to be a primary residence. So while it may be pricey from a tax standpoint, the city, thanks to its status as a vacation hotspot, is not especially harsh on short term rentals.
Taxes & Regulations for Hilton Head Island Vacation Rentals
What is required of Hilton Head Island hosts is the acquisition of the proper licenses and paying an accommodations tax. Business permits are required of all hosts that operate two or more short term rental properties, meaning those who are just renting out a room in their home or their property, don’t need to apply for a business permit. By having more than one property the city will consider you, the host, to be a one-person LLC. Business licenses are not difficult to acquire as there are applications available fully online. However, everyone operating a residential rental does need an ATX permit. ATX refers to Accommodation and Beach Preservations fees. In addition to the permit, hosts also need to pay the actual Accommodation and Beach Preservation tax (ATX). This ATX is 3% broken up as 1% for the accommodation tax and 2% for beach preservation. These are applicable to all hosts who rent to any individual for 90 days or fewer.
Total Tax Numbers for Hosts in Hilton Head
These Hilton Head specific taxes are due every quarter and must be submitted by the 20th of each quarterly month. So on the 20th of April, July, October, and January, these taxes must be paid to Hilton Head’s online governmental portal, through the mail, or in person at Town Hall. Hosts should be well aware that those who do not pay on time are liable to get charged significant fines. The fines could either be a 5% fee on the amount due applied every month it is late, or a fine of $1,088 coupled with a municipal summons.
Although, Hilton Head hosts are paying 3% directly to the city does not earn them immunity from the state-level taxes levied by South Carolina. So, every fiscal year owners of Airbnbs and other short-term rentals must pay an additional 8%. This 8% is broken down into 5% sales tax, 2% state accommodation tax, and 1% transportation tax. When all is said is done Hilton Head Island vacation rental owners payout 11% in total.
How Much Tax Revenue is Generated by Airbnb Hosts in Hilton Head?
Figure 5 – Taxes payable by Airbnb hosts in Hilton Head Island
Year-to-date (Jan-Oct 2019) Tax Payable by Airbnb Hosts in Hilton Head:
- State Accommodations Tax – $482,560
- State Sales Tax – $1,206,399
- State Transportation Tax – $241,280
- Local Accommodations Tax – $241,280
- Beach Preservation Fee – $482,560
The above is just for Airbnb – if we add in the taxable income from properties on Vrbo, which tends to dominate in traditional vacation rental markets like Hilton Head Island, then the tax revenues are even greater, and even more so if we include other listing sites (e.g. Tripadvisor Rentals). This is also not accounting for potential revenues received from fines of noncompliant properties. Vrbo also often markets luxury vacation homes with higher ADRs.
As it stands, Airbnb is generating around $2,654,000 in the 10 months of 2019. Hilton Head, despite its already established success, is also still seeing upward market trends. If growth holds steady into 2020, just local fees and taxes could approach the $1 million mark by this time next year from Airbnb alone.
There are anti-Airbnbers who would argue that Hilton Head Island is light on Airbnb regulations. While this may be true in comparison to some places, because it is a large market the taxes that these properties are generating are significant. Just locally, Airbnb could easily create 1 million extra dollars for the community. Approximately 60% of which is going towards the preservation of Hilton Head’s beaches, which is good for the environment, but is also an investment in the geographical feature that generates so much tourism in the first place. If these taxes are being collected and enforced properly, Airbnb should not be viewed as a threatening infringement upon residents but rather an opportunity to reinvest in the town itself.