State Sales and Use Tax in a Sharing Economy
Donald Kaiser, CPA, Principal
Focused on You. Dedicated to Your Success.

More people are buying or selling goods and services offered online from third-party facilitators or individuals. Some services such as Uber or Lyft for transportation and Airbnb for accommodations are considered part of the sharing economy (also referred to as the on-demand economy).  

The sharing economy is defined as “an economic system in which assets or services are shared between private individuals, either for free or for a fee, typically by means of the internet.” Individuals who have excess capacity are driving people around in their personal vehicles or renting out rooms in their homes through companies that facilitate the delivery and payment of said services online.

Third-party facilitators handle the details, usually for a fee, of arranging the transactions between the buyer and the owner-seller or service provider. Many facilitators have no ownership interest in the goods and do not directly provide the service offered for sale. 

According to the Bloomberg BNA 2017 Survey of State Departments , the sharing economy presents a challenge to states on who is responsible for collecting and remitting sales tax. In some states the facilitator (Uber, Lyft, or Airbnb) is responsible and in others the individual or both. For example, in Bloomberg BNA’s 2017 study, 15 states said the third-party facilitator is responsible for collecting and paying sales tax for short-term accommodations and 8 for transportation services. The owner of the property providing the short-term accommodations is responsible for the sales tax in 25 states and owner of the vehicle providing the transportation is responsible in 18 states. Twelve states hold both the third-party facilitator and the owner responsible for short-term accommodations and 10 for transportation services. Several states consider transportation services as non-taxable income.

In Pennsylvania, the owner of the property must collect and remit sales tax for short-term accommodations and both the third-party facilitator and owner for transportation services. In New Jersey, short-term accommodations are currently not taxed. Sales tax must be collected by the vehicle owner for transportation services in the Garden State. In New York, the property owner is responsible for the sales tax on short-term accommodations and transportation (note New York did not specify if the third-party facilitator is responsible in its response). Click here (link to the Sales Tax Policies: Sharing Economy on MCC-CPAs.com) for each state’s sales tax policy for the sharing economy. 

Feel free to contact either Don Kaiser (732-341-3893 ext. 15 or Donald.Kaiser@MCC-CPAs.com ) or myself (610-828-1900 or Marty.McCarthy@MCC-CPAs.com ) with questions. We are always happy to help.
Martin C. McCarthy, CPA
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).