State of the state: Arizona short-term rental rules
- Aug 30, 2022 | Jennifer Sokolowsky
In this series of blog posts, we offer an overview of the short-term rental lodging tax obligations for certain states, along with the latest rules on short-term rental operations.
Arizona offers warm, sunny weather, Southwest cuisine and culture, and desert beauty — including the Grand Canyon, one of the top tourist attractions in the United States. All of this contributes to Arizona’s status as a popular vacation spot, and short-term rentals there are in high demand.
While the state government has traditionally protected the short-term rental industry with legislation limiting the ability of local governments to regulate vacation rentals, that stance has softened in recent years as communities become more vocal about the impacts of vacation rentals on their neighborhoods.
Vacation rental lodging taxes
In Arizona, lodging taxes operate a bit differently than in other states. Vendors are taxed for the privilege of doing business in the state, with Transaction Privilege Tax (TPT) levied on short-term rental businesses according to their gross receipts. For tax purposes, short-term rentals in Arizona are defined as reservations of less than 30 days. Short-term rental business owners may pass the taxes on to their guests.
Short-term rentals in Arizona may also be subject to county excise tax and local transient occupancy tax.
Tax registration and filing
Arizona short-term rental operators are legally required to register with the Arizona Department of Revenue. Hosts can register online to receive a TPT license and then pass TPT on to guests when they’re billed.
Tax collection by short-term rental marketplaces
Arizona requires all short-term rental online marketplaces, such as Airbnb and Vrbo, to collect and remit state and local taxes on Arizona short-term rentals. If taxes aren’t being paid on behalf of an operator, they’re responsible for paying and remitting them to state tax authorities.
State vacation rental legislation
In 2017, Arizona passed a law that largely prohibited cities, towns, and counties from restricting short-term rentals, but the state has gradually eased some of the restrictions on local control.
A 2019 law required short-term rental operators to obtain a TPT license and include that license number in all ads. It also banned short-term rentals from hosting special events that would normally require a permit, such as large parties. Under that law, municipalities were also allowed to require short-term rental owners to provide contact information for someone who could respond to complaints in a timely manner.
The most recent state legislation on vacation rentals, which goes into effect September 24, 2022, allows cities and towns to regulate short-term rentals in these ways:
- Requiring permits or licenses
- Requiring community notification of operations
- Mandating liability insurance coverage
- Fining owners or management companies when guests violate ordinances
Under the ordinance, local law enforcement will be authorized to impose fines of up to $3,500 or three nights’ rent for violations. Short-term rental operators that have three violations within 12 months may face an Arizona Department of Revenue hearing that could lead to a yearlong suspension. If a short-term rental violation involves a wrongful death, felony offense, or if a host willfully houses a sex offender, local authorities may suspend that property’s license for a single violation.
Local short-term rental laws
Local governments have taken advantage of more state leeway in crafting their own vacation rental regulations. Municipalities that have been active in passing new laws in recent years include Chandler, Phoenix, and Scottsdale. In January of 2022, Scottsdale updated its short-term rental law to better define rules, increase accountability of short-term rental owners and emergency contacts, and improve enforcement, including increasing fines.
Get help with Arizona vacation rental taxes
Avalara MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance on the local and state level, including tax registration and filing. For more on vacation rental lodging taxes in Arizona, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.