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These states offer financial incentives for filing lodging tax returns on time

  • Feb 2, 2021 | Jennifer Sokolowsky

Tax time sticky note reminder on clock in front of digital tax form on laptop screen

Over the past several years, lodging tax compliance has become an essential part of the short-term rental business.

Hosts have become more aware of the requirements to collect these taxes from guests and remit them to the authorities. Meanwhile, governments have become more serious about enforcing lodging tax requirements for vacation rentals and short-term rental platforms have started to work with authorities to strengthen that enforcement.

While all state tax authorities penalize short-term rental operators who fail to live up to their lodging tax obligations, some states use a carrot along with a stick. These states — fewer than 30 altogether — offer incentives to payers to file tax returns on time and in full.

These incentives have a variety of names, from “accounting credit” to “vendor discount,” to “timely payment discount,” or “service fee.” But they all allow lodging tax filers to keep a small amount of the tax they’ve collected.

The amounts of these incentives vary from state to state, ranging from less than 1% of the tax owed up to around 5%. Most jurisdictions have some sort of cap on the total discount that can be taken, from as little as less than $30 per period to as much as $20,000 per year.

Whatever the amount, it pays to be aware of the rewards you can reap from filing your lodging taxes on time.

Here’s a breakdown of states that offer incentives for timely filing of lodging taxes — which may include sales taxes, occupancy taxes, tourism taxes, and more — and their amounts. Discounts listed here are for state-administered taxes only; local taxes may have their own discounts.

State

2020 sales tax timely filing discounts

Alabama Lodgings tax: 5% on the first $100 of tax due; 2% of all tax due over $100; maximum $400 per month.
Arizona Transaction privilege tax (TPT): Accounting credit of 1%, maximum $10,000 per calendar year for returns filed on paper; accounting credit of 1.2%, maximum $12,000 per calendar year for returns filed electronically.
Arkansas Tourism tax, short-term rental tax, sales tax: 2%, maximum of $1,000 per month.

Colorado

Sales tax: 4%, maximum $1,000 per filing period. Timely filing service fees for state-administered local sales, marketing district, lodging, and special district tax range from 0% to 4%.

Florida

State sales tax and state-administered discretionary sales surtax and local option tax: 2.5% of the first $1,200 due; maximum $30 per report; only available to taxpayers who file and pay electronically.

Georgia

State and county sales tax: 3% on the first $3,000, 0.5% on the remainder.

Illinois

Hotel operators' occupation tax: 2.1%.

Indiana

Sales tax: 0.73% of less than $60,000; 0.53% of between $60,000 and $600,000; 0.26% of more than $600,000.

Kentucky

Sales tax: 1.75% on the first $1,000, 1.5% on the remainder; maximum of $50 per month.

Louisiana

Sales tax: 1.05%, limited to $1,500 per calendar month per dealer. A portion of the state sales tax isn’t eligible for discount. To simplify calculation, the Louisiana Department of Revenue recommends using a 0.944% rate.

Maryland

Sales tax: 1.2% on annual collections of up to $6,000, 0.9% on the remainder, plus $18; maximum of $500 per reporting period.

Michigan

Sales tax: Discounts apply only to two-thirds of the sales tax collected. $6 discount for amounts $9 to $1,200 paid by the 12th or amounts $9 to $1,800 paid by the 20th; 0.75% discount for tax of more than $1,200 paid by the 12th, maximum discount $20,000 per tax period; .05% discount for more than $1,800 paid by the 20th, maximum $15,000 per tax period.

Mississippi

Sales tax: 2%; maximum $50 per reporting period, $600 per year.

Missouri

Sales tax: 2%.

Montana

Lodging facility sales tax: 5%.

Nebraska

Sales and lodging tax: 2.5%; maximum $75 per month.

New Hampshire

Meals and rooms tax: 3%.

New York

5%; maximum $200 per quarter; available only for quarterly and annual filers.

North Dakota

1.5%; maximum of $110 per month.

Ohio

Sales tax: 0.75%.

Pennsylvania

Hotel occupancy tax: For monthly filers, the lesser of $25 or 1%; for quarterly filers, the lesser of $75 or 1%; for semi-annual filers, the lesser of $150 or 1%.

South Carolina

Sales and accommodations taxes: 3% on less than $100; 2% on $100 or more; maximum $3,100 per fiscal year for in-state electronic filers or $3,000 for in-state paper filers.

South Dakota

Sales and tourism taxes: 1.5% for electronic filing; maximum $70 per reporting period.

Texas

1%.

Utah

Sales tax: 1.31% for monthly filers.

Virginia

Sales tax: 1.116% for monthly taxable sales below $62,500; 0.837% for monthly taxable sales from $62,501 to $208,000; 0.558% for monthly taxable sales of $208,001 or more; no discount allowed if average monthly sales tax liability exceeds $20,000.

Wisconsin

Sales tax: For total tax collected below $10, the discount is equal to the total tax; for total tax collected from $10 to $2,000, the discount is $10; 0.5% for total tax collected above $2,000, with a maximum $1,000 per reporting period.

Wyoming

Sales and lodging taxes: 1.95% on the first $6,250, 1% on the remainder; maximum of $500 per filing period, per vendor.

 

MyLodgeTax can help automate and simplify tax compliance for short-term rental hosts. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.


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
Jennifer Sokolowsky
Avalara Author Jennifer Sokolowsky
Jennifer Sokolowsky writes about tax, legal, and tech topics. She has an extensive international background in journalism and marketing, including work with The Seattle Times, The Prague Post, Avvo, and Marriott.