Sales and Lodging Tax Basics
As a vacation rental owner, you are most likely required to collect sales and lodging taxes on your rentals. Learn more about what’s required.
Vacation Rental Tax Requirements
As a vacation rental property owner, you are required to charge and collect taxes on all short term rentals. In some cases short term rentals are defined as rental periods up to six months. Many of these taxes are specific to lodging and are a significant tax revenue source in resort communities. These taxes are established by state, county and city governments and may be referred to as sales, lodging, hotel, room, occupancy, or transient accommodations taxes.
These taxes are charged on the total revenue (rent) you collect you’re your renters, including cleaning fees, cancellation fees, gratuities, etc. There are not deductions to sales taxes, it is a tax on revenue, not on net income.
State and local tax authorities frequently review the list of major vacation rental website to monitor compliance. Non-compliance may result in significant penalties and interest charged by tax authorities on taxes not collected.
As a vacation rental property owner you’re required to:
Register your property
The registration process varies by location. In some states you are only required to register with the state and in other locations you are required to register with the state, county and city. It is important to check with each governmental authority.
Collect sales tax from renters.
The tax you are required to collect is set by state, county and city governments. In some areas there is one rate for the entire state, in others, the taxes charged varies by the county and city. Generally, these taxes range from 5% to 15% tax on the total rent charges, typically averaging around 10%.
File tax returns monthly and/or quarterly
Once you collect the tax from your renters, you are required to file the appropriate tax returns to the state, county or city (potentially all three based on the location of your property). These returns are typically due monthly or quarterly.
Make tax payments to city, state, and county tax authorities.
Along with the tax return, payment must be remitted each month or quarter to the appropriate state, county and/or city. Due dates for these tax returns and payment is typically the 15th, 20th or 30th of the following month.
HotSpot Has Partnered with Leading Vacation Rental Websites
Due to the complexity, importance and administrative burden of these tax requirements, leading vacation rental websites such as VRBO.com, Homeaway.com, Greatrentals.com, Cyberrentals.com, A1vacations.com and many others have partnered with HotSpot Tax Services. HotSpot offers a low cost effective, guaranteed solution to handle all of these compliance issues for you.