Use the following helpful hints to help you figuring out the sales & lodging tax requirements for your location:
- Research each tax jurisdiction where your property resides, including the state, county and city (if your property is within city limits). It is common that there are multiple levels that apply to your vacation rental.
- Call the city or county first, they will typically be more helpful--calling state tax/revenue departments may be a frustrating experience, so start with the smaller tax jurisdictions.
- Use the internet to research the tax requirements on the city, county or state website, it is an excellent resource to research the tax requirements. Rules may be vague, difficult to find or unclear, so calling to confirm the requirements once you have researched and become more educated on the issues online is always a good option.
- The business activity for vacation rentals are usually defined by the word transient (transient rentals, transient lodging, transient accommodation, etc) 'Transient' is a key search term.
- Transient rentals (short term) are usually subject to sales tax, but check other types of taxes too--such as lodging, room, bed, tourist development and more. In addition to traditional sales taxes, many jurisdictions apply an additional room or lodging tax.
- If your property resides in a residential area or a location where there are a high percentage of year round residents there may be zoning restrictions. Check zoning with your city or county first--this help you avoid serious problems in not being allowed to rent your property. Also, we highly recommend that you deal with zoning on anonomous basis. Do not give them your name or property address initially. Ask if there are any restrictions on vacation rentals in the area and give them your street name or development, NOT the exact address.
- Make sure you determine the definition of a 'long term' rental. In most cases you donít have to pay tax on long term rentals (typically at least 30 days to as much as six months)
Tips for ongoing compliance and tax return filing:
- File and pay your taxes on time each month or quarter. Many tax jurisdictions give you a discount if you return is filed on time. More importantly, late penalties and interest is something you should avoid at all cost, it can be expensive and sometime difficult and time consuming to clear up.
- Either file online (where available) or use the tax return forms sent to you by the tax jurisdiction. Most states offer online filing and most cities and counties do not.
- Make sure you verify the tax rate on the tax forms or information mailed to you. Tax rate are subject to change and tax jurisdictions typically give very late notice of tax rate changes.
- If you receive a notice or correspondance from a tax jurisdiction, donít ingore it! Respond very timely.
- File a return even if you have no revenue to report or tax to pay. All tax jurisdictions require a return to be filed each period whether you have any tax to pay or not. The will levy penalties for not filing a return, even with no activity to report.
- Keep a copy of the return you filed and cancelled check.