Avalara MyLodgeTax > Blog > Lodging Taxes > Short-term rental enforcement in Denver stands to improve

Short-term rental enforcement in Denver stands to improve

  • Feb 1, 2018 | MyLodgeTax

A report from the city auditor found plenty of holes in Denver’s enforcement of its new short-term rental law. Furthermore, the audit determined that approximately one-third of short-term rentals continue to operate illegally, a year after the law went into effect.

However, the city’s Department of Excise and Licenses, which administers the short-term rental program, contends the program is progressing according to plan and that Denver is far ahead of most communities when it comes to short-term rental compliance.

Denver short-term rental operators are required to register for a business license, post an identification number on any online advertisements, and collect taxes from their guests.

Denver has a short-term rental registration rate of above 70 percent, the highest in the country. The next-best city in the U.S. is New Orleans, with a compliance rate of 53 percent.

The auditor’s report nevertheless pointed to flaws in enforcement so far, including 45 applicants receiving multiple licenses when they’re only supposed to have one. Out of those, 20 applicants received licenses for multiple addresses. The law only allows operators to offer their primary residence up for rent, so each operator should have a license for only one address.

The auditor’s office also found problems with invalid identification numbers used on rental licenses due to confusion about the process. Department officials responded that they’re working on the issue.

Another suggestion from the auditor’s office is that the department work on analysis to see if the short-term rental rules are having the intended effect on affordable housing and neighborhood quality, although the department stated this is outside its area of expertise.

The city has generated nearly $2 million in tax revenues from short-term rentals since January 2017. Short-term rental hosts in Denver are required to collect from guests a 10.75 percent lodger’s tax, which they remit to the city, and a 4 percent sales tax, which goes to the state.

Airbnb automatically collects and remits the state sales tax for hosts who use its site, but hosts who use other listing platforms, such as VRBO or HomeAway, are responsible for collecting and remitting lodging taxes to the state themselves.

While Airbnb also manages lodging taxes for some communities in Colorado, including Boulder, Colorado Springs, and Golden, it does not do so in Denver. That means Denver short-term rental operators must manage city lodging tax compliance themselves, no matter which listing platform they use.

For Denver short-term rental operators, the scrutiny of the city’s enforcement of short-term rental laws means owners can expect even stricter enforcement going forward. For those operating short-term rentals illegally (perhaps unwittingly), now is the time to start complying with registration and taxation requirements in order to avoid potential fines and interest, on top of any back taxes owed.

Lodging 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.
Avalara Author
Avalara Author MyLodgeTax
At Avalara MyLodgeTax, we provide the fastest and easiest way for short-term and vacation rental property owners to comply with their lodging or occupancy tax requirements. We manage your lodging taxes so you don't have to and guarantee your compliance — period. If we make a mistake, we'll fix it at no cost to you. No contracts, no obligation, no worries. Never worry about lodging taxes again. Contact us at MyLodgeTax@Avalara.com.