State of the state: North Carolina STR rules

In this series of blog posts, we offer an overview of the short-term rental (STR) lodging tax obligations for certain states, along with the latest rules on short-term rental operations.

North Carolina is a perennially popular vacation destination, offering a variety of travel opportunities. Visitors flock to the state’s beautiful beaches, outdoor recreation areas such as the Great Smoky Mountains, and up-and-coming urban destinations such as Asheville. Short-term rentals are recognized in state laws covering lodging taxes and rental contracts, but the state doesn’t generally set short-term rental industry regulations; that’s the responsibility of local governments.

In North Carolina, short-term rentals are subject to state and local sales tax, administered by the North Carolina Department of Revenue, as well as local lodging taxes, administered by local tax jurisdictions. Short-term rentals are defined as reservations of fewer than 90 continuous days.

North Carolina STR operators are legally required to register with the North Carolina Department of Revenue. You can register online to receive a state Sales and Use Tax Certificate of Registration. Depending on your jurisdiction, you may be required to register with your local tax authority and file local lodging tax returns in addition to state registration and filing.

North Carolina requires all marketplace facilitators whose gross sales exceed $100,000 or 200 transactions yearly sourced to North Carolina to collect and remit state and local sales and occupancy taxes on behalf of all sellers (hosts). This includes short-term rental marketplaces Airbnb and Vrbo.

Hosts do not need to register with the state or file lodging tax returns if all their transactions are made through a marketplace. However, operators are responsible for remitting taxes to the state if lodging taxes aren’t being collected and paid on their behalf, such as when guests book directly with the host rather than through a marketplace. Local tax jurisdictions may have their own rules for tax collection by short-term rental marketplaces.

A number of North Carolina cities and counties have passed their own ordinances to regulate STRs, particularly in highly touristed areas. For example:

Short-term rental hosts in Chapel Hill must apply for zoning compliance permits for their properties under a law passed in 2021. The rules also limit the number of “dedicated short-term rentals” used entirely for rental purposes without a primary resident. These types of rentals are restricted to high-density, mixed-use, and commercial areas of Chapel Hill. Vacation rentals occupied by their owners are allowed in all neighborhoods, unless prohibited by a homeowners association. In addition to registering with the North Carolina Department of Revenue, STR operators must also register with Chapel Hill for occupancy tax, collect the tax from guests, and file occupancy tax returns. 

Raleigh also approved a new STR ordinance in 2021. The regulations require operators to obtain a city zoning permit and post their permit numbers on all advertisements. The law also bans special events and gatherings and limits STRs in multifamily buildings to 25% of building units (or two units, whichever is greater). Raleigh vacation rentals are subject to Wake County room occupancy tax along with state-administered lodging taxes. Operators must register with the county, collect the tax, and file occupancy returns. 

Asheville, meanwhile, got the jump on vacation rental rules, passing a strict STR law in 2018. Short-term rentals that had city permits before the new rules were put into place were allowed to continue to operate. However, vacation rentals are now required to get special permission, called “conditional zoning,” from the City Council to go into business. New vacation rentals are still allowed in areas of the city zoned as “Resort.” They’re also permitted for “homestays” where the host is present during a guest’s stay. Homestays must be operated out of the host’s primary residence, and only one permit may be issued per operator. In addition to state-administered taxes, Asheville short-term rentals are subject to Buncombe County occupancy tax and operators must register with the county and file occupancy tax returns.

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 North Carolina, 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.