Airbnb will start collecting lodging tax in Knoxville, Tennessee

Short-term vacation rental platform Airbnb has made a deal with Knoxville, Tennessee, to collect the city’s 3 percent occupancy tax on behalf of its short-term rental hosts, beginning June 1.

Airbnb already collects the state’s 7 percent sales tax on accommodations as well as the local option sales tax of 2.25 percent.

For Airbnb hosts, the new deal means that Airbnb automatically collects all sales taxes due on short-term rentals as well as Knoxville’s city occupancy tax. However, Airbnb does not collect Knox County’s 5 percent occupancy tax, so hosts are responsible for collecting that themselves.

Knoxille short-term rental hosts who use other vacation-rental platforms, such as HomeAway and VRBO, are responsible for collecting all state, city, and county taxes on their own, since those platforms do not collect lodging taxes on behalf of their hosts.

The MyLodgeTax service can help Knoxville short-term rental hosts make sure they’re complying with all lodging tax obligations, whatever platform they use.

Knoxville’s short-term rental law, passed last year, took effect on January 1 of this year. In addition to requiring short-term rental operators to collect lodging taxes, the ordinance requires hosts to obtain permits and provide a contact person who can be reached 24 hours a day. In residential zones, short-term rentals are allowed only in owner-occupied properties. Non-owner-occupied short-term rentals are allowed in other zones.

Knoxville has set up a 24-hour hotline for residents with any concerns or complaints about short-term rentals. The city has also contracted with Host Compliance, a company that specializes in tracking and identifying short-term rental listings, to provide data on short-term rental activity, including information on listings operating without city permits. Short-term rental operators who do not comply with vacation rental rules can be cited by the city.

Short-term rentals have been a hot topic in Tennessee. Governor Bill Haslam recently signed a new state law that places some limits on how cities can regulate short-term rentals. The law takes effect immediately.

The new law limits the power of cities to completely ban short-term rentals that have already been doing business. It grandfathers in non-owner-occupied short-term rentals that were originally allowed by local law, allowing them to continue to operate if the city changes the law to ban them.

The practical ramifications of the new state rules for communities are still up in the air. The new legislation could affect a law that Nashville passed earlier this year phasing out short-term vacation rentals that aren’t occupied by their owners — mainly single-family homes and duplexes — from residential neighborhoods.

In Wilson County, Tennessee, leaders are hitting the pause button on new short-term rental rules until they can get more information on the effect of the new state law. The county commission approved an amendment to its zoning regulations in March that would treat short-term residential rentals like bed-and-breakfasts.

Airbnb has aggressively pursued tax-collection deals with local governments across the country. The company recently completed a deal with the state of Montana to collect statewide lodging taxes. It has also inked agreements with Orleans County, New York, and Racine, Wisconsin, to start collecting lodging taxes starting June 1.

Have questions about managing Tennessee vacation rental taxes? Refer to our Tennessee Guide to Vacation Rental Tax for help.