How Sales & Lodging Taxes Work

The following is an example of how the basic sales and lodging tax calculations are applied and how the tax payments are remitted. In this case the example is for Destin, Florida (Okaloosa County).

In this example we assume a transaction where the home is rented seven nights for $250 per night, plus a $100 cleaning fee. Sales tax calculations are relatively simple, the total rent received is multiplied by the tax rate. The "Guest charges" table demonstrates how the tax is calculated and charged to the guest.

Now that the tax has been collected from your guest, the other tables summarize the calculations for each tax return and payment, one return for Florida and one return for Okaloosa County. In the following example we will assume the previous rental was the only booking for the month. Of special note, Florida and Florida counties allow the taxpayer to keep 2.5% of the tax due as compensation for collecting and remitting the tax, as long as the return is filed on time. This is known as the collection allowance.

The completed tax return form and payment needs to be postmarked by the 20th of the month following the month of the tax period, otherwise penalties and interest will apply. For example, taxes on revenue for the July rental period need to be postmarked by August 20th.

This example was for a vacation rental in Destin, FL. It is important to note that tax rates, due dates, collection allowances (if any) and filing frequency for returns vary by city, county and state across the U.S. The method of calculating the tax on a rental and calculations for completing a tax return are generally universal for all jurisdictions. A high percentage of locations require monthly filing but there is also a high percentage that require quarterly filing. Taxes due on the 20th is the most common date, but a large percentage of returns are also due on the 15th, 25th and 30th (or last day of the month).

Destin, FL Example

Guest charges
Rent$1,750.00
Cleaning$100.00
Total taxable$1,850.00
Tax (11%)$203.50
Total charge$2,053.50
Florida return
Taxable revenue$1,850.00
Tax (6%)$111.00
Collection allowance (2.5%)($2.78)
Net tax due$108.22
Okaloosa County return
Taxable revenue$1,850.00
Tax (5%)$92.50
Collection allowance (2.5%)($2.31)
Net tax due$90.19