Austin raises tax rate that short-term rentals must charge

The City Council of Austin, Texas, has voted to raise the city’s hotel occupancy tax from 7 percent to 9 percent, effective immediately. That will increase the amount of tax short-term rental operators must collect from guests.

The increase should raise the city’s projected hotel tax revenues from about $102 million to at least $120 million.

The council raised the tax in order to expand the Austin Convention Center. However, a referendum on the ballot in November will allow voters to decide on an ordinance that would cap the city's ability to spend money from hotel taxes on the convention center. The proposed law would require the city to spend 15 percent of hotel tax revenue on supporting cultural tourism and businesses and 15 percent on historical preservation.

Short-term rental hosts in Austin are legally required to collect city hotel taxes from their guests as well as a 6 percent state hotel occupancy tax. Hosts are required to register with tax authorities at both the state and city level, and file regular lodging tax returns.

Airbnb and Vrbo/HomeAway automatically collect the state portion of the tax for bookings on their platforms. However, those platforms do not collect city tax, so Austin hosts must collect and remit the city portion of the tax themselves.

MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance, from registration to tax return filing, at both the city and state levels. If you have tax questions related to Austin vacation rental properties, drop us a line and we’ll get back to you with answers.

For more information on short-term rental taxes in Texas, see our state Hotel Occupancy Tax Guide.

Austin, with one of the most restrictive short-term rental laws in the state, requires vacation rental hosts to have a license. Unlicensed short-term rentals are prohibited from advertising, with fines of up to $2,000 per day for violations. The law also limits short-term rental property density, noise levels, and occupant numbers. Short-term rentals in residential areas will be required to cease operation by April 1, 2022.

Austin is taking short-term rental laws seriously, recently sending out warning notices to short-term rental operators believed to be operating without a required license. City officials say they’ll start strictly enforcing short-term rental laws against thousands of illegal vacation rentals starting early next year.

Austin has issued approximately 2,500 short-term rental permits, but 10,000 vacation rentals are advertising in the city, according to Host Compliance, a company hired by the city to track illegal short-term rentals. Host Compliance is expected to provide advertising and location data for 3,500 of the illegal listings by February, when the city plans to start enforcement actions.