Short-term rental company sues Michigan over $18.7M tax bill

A nationwide short-term rental company is suing the state of Michigan over a tax audit that found the company owes about $18.7 million in unpaid use taxes to the state.

HomeAway, a Texas-based company best known for its vacation rental platform Vrbo, received a September bill for taxes due from the Michigan Department of Treasury for unpaid use taxes and interest in 2020, 2021 and 2022, totaling $18.7 million, according to the lawsuit filed in the Michigan Court of Claims.

HomeAway maintained in its Dec. 18 filing that it is the homeowners themselves who are responsible for collecting use taxes related to the short-term rental of their homes and remitting those taxes to the state.

“All funds representing use tax collected from guests were disbursed to the hosts,” the company said in its filing.

The state Department of Treasury and HomeAway declined to comment on pending litigation.

The tax fight comes amid a separate, but related, years-long fight in communities across the state and in the Legislature over how to best regulate and, in some cases, tax short-term rentals, which began to grow in popularity in Michigan after the 2008 housing crisis.

The Legislature has toyed with the idea of banning any local regulations over short-term rentals, putting some limits on those local regulations or establishing a statewide policy for short-term rental housing. State Rep. Mark Tisdel, R-Rochester Hills, helped introduce bills this fall that would allow communities to hold a vote on whether to tax short-term rentals locally to pay for essential services such as police or fire. The legislation has yet to receive a hearing.

In its suit filed Dec. 18 in the Michigan Court of Claims, HomeAway maintained that it was cognizant of the state’s 6% use tax and made provisions for its collection. But the ultimate remittance of that tax to the state is left to the homeowner.

When onboarding, according to the suit, a host or homeowner is given options regarding how they collect taxes. In Michigan, they could make it a percentage of the rental amount at booking or collect and remit the tax separately.

In either case, HomeAway argued, the host was responsible for paying the use tax. If the host made it a percentage of the rental amount due at booking, the taxes charged in the booking process were sent back to the host for remittance to the state. If the host indicated he or she would collect and remit on their own, the entire process was left to the host, according to the filing.

“The host acknowledged and represented that the host would handle tax collection from guests independent from HomeAway’s online checkout process,” HomeAway wrote in its filing. “…HomeAway never received or retained any tax amounts.”

In January 2023, the Department of Treasury began an audit of the prior three years, and in June 2025, the department issued a bill for taxes due for the audit period. The department found HomeAway wasn’t responsible for paying taxes if the host indicated he or she would collect and remit on their own. But the department maintained the company was responsible for remitting taxes where the host picked the option requiring the tax to be a percentage of the rental amount due at booking, the lawsuit said.

On Sept. 19, 2025, the Department of Treasury issued an $18.7 million bill, with about $15.1 million owed in use taxes and $3.6 million owed in interest. The bill included a total of $676,246 in use tax and interest for 2020, $8.6 million for 2021 and $9.5 million for 2022.

“The department — for the first time during the audit — alleged that for all bookings for which tax was collected on behalf of and at the request of the host, HomeAway unjustly enriched itself by failing to remit the collected taxes to the department,” the filing said.

The state treasury bills, attached to the lawsuit as exhibits, only note that the money due is for use tax and interest following an audit. There is no mention in the bills of which type of rentals HomeAway was responsible for when it came to remittance of the use tax.

HomeAway, in its lawsuit, denied that it was unjustly enriched, arguing the company didn’t keep any of the tax payments, but instead forwarded them to homeowners to remit to the state.

“It was the hosts — not HomeAway — that were responsible for remittance of use tax to the departments,” the filing said.

HomeAway also alleged the department’s audit violated the federal and state Equal Protection Clauses because it treated HomeAway differently from other similarly situated taxpayers.

“There is no precedent to support the department’s allegation, nor has the department applied this theory to similarly situated taxpayers,” the filing said.

eleblanc@detroitnews.com