Avalara report pinpoints 2023 changes for STR lodging taxes

If there’s one constant in the world of short-term rentals, it’s change. The industry has undergone enormous changes since the founding of Airbnb over a decade ago, and the COVID-19 pandemic introduced another seismic shift. As travelers adjust to a post-pandemic world, the landscape continues to evolve.

The same is true when it comes to lodging tax compliance for short-term rental (STR) operators. Avalara has kept a close eye on lodging tax trends for 2023 and offers insights for hosts in its Avalara Tax Changes 2023 report.

Read on for highlights and take a look at the lodging tax section of the full report.

Accommodation demand continues to bounce back

The accommodation sector is leading post-pandemic recovery for the travel industry, according to the Avalara report. Short-term rentals are a growing part of that sector: They accounted for roughly 27% of the U.S. lodging market in 2021, a 10-point increase over 2019.

Vacation rental demand is tapping into the growing trend of “bleisure,” or blended business and leisure travel, as well as new capabilities to work from anywhere (WFA). Laptop luggers and digital nomads are recognizing that short-term rentals often offer the perfect environment to enjoy travel while getting work done.

STR guests getting younger, hosts becoming more professional

Vacation rentals are especially popular among younger guests. Just over half of all Airbnb bookings are by travelers between the age of 18 and 34, according to iPropertyManagement. Meanwhile, more hosts are managing more than one property, a trend called the “professionalization” of the STR industry. Almost 60% of 2019 bookings on Airbnb were for hosts with multiple listings on the marketplace. In 2020, more than 60% of hosts used a property manager for complete rental management.

STR tax compliance is here to stay

Lodging taxes can be complicated and confusing. Many operators may mistakenly think their short-term rental marketplaces, such as Airbnb and Vrbo, automatically collect all required lodging taxes from their guests when they pay. The reality: Marketplaces collect lodging taxes on behalf of their hosts in some tax jurisdictions for some taxes. It’s up to short-term rental hosts to find out which taxes their marketplace collects and which they need to take care of themselves.

In the vast majority of cases, operators are responsible for compliance, not the marketplace. A 2022 National League of Cities survey showed that only 5% of cities require short-term rental marketplaces to collect and remit local taxes on their hosts’ behalf, while 82% require short-term rental hosts to remit taxes directly to the city.

States finding more ways to collect STR taxes

Many states have long required Amazon and other online marketplaces to collect and remit applicable sales taxes for third-party sellers. Now more states are extending these laws to online travel agencies (OTAs), including short-term rental marketplaces.

Virginia now requires marketplaces to report property addresses and gross receipts for all accommodations they facilitate. In Oklahoma, marketplaces must collect and remit local lodging taxes administered by the state, effective January 1, 2023.

For more about 2023 tax changes, download Avalara’s full report.

Avalara MyLodgeTax can help short-term rental hosts simplify and automate lodging tax compliance. If you have tax questions about lodging taxes, drop us a line and we’ll get back to you with answers.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.