STR owners in Sevier County, Tennessee, must now pay commercial property tax rates
- May 4, 2023 | Jennifer Sokolowsky
Short-term rentals (STRs) in Sevier County, Tennessee, will be taxed as commercial properties rather than residential properties, according to new rules from the Sevier County Commission. The new property tax rates were prompted by the state comptroller's office.
Under the change, owners of licensed short-term rentals that are not primary residences will pay the 40% commercial property tax rate versus the 25% rate that applies to residential properties. The new rate will apply for this year on tax bills that will go out to homeowners in October.
Sevier County officials estimate that 13,000 short-term rentals are operating in the county. Currently, only 2,500 vacation rental properties are taxed at the commercial rate. The increase is expected to generate an additional $8 million for the county.
The new property taxes in Sevier County will be paid by homeowners annually. Tennessee short-term rentals (defined as rentals of 180 days or less) are also subject to lodging taxes, which are paid by guests but collected by short-term rental hosts. Sevier County short-term rental operators are also required to obtain a business license from the county.
Hamilton County passes new STR rules
In Hamilton County, Tennessee, county commissioners have approved new short-term rental regulations following a moratorium on new vacation rentals that began in October 2022. Under the amended zoning law, which applies to unincorporated areas, short-term rental hosts will need to get a short-term vacation rental certificate from the county and undergo annual inspections.
The new ordinance also allows STRs, defined as stays of 30 days or less, in all zones except manufacturing districts. Previously, STRs were not allowed in the county’s low-density residential district. The law also prohibits events at short-term rentals without a special permit and requires operators to follow rules on occupancy limits, parking, and more.
STRs also subject to lodging taxes in Tennessee counties
In both Sevier and Hamilton counties, short-term rentals are subject to lodging taxes including state sales tax, which is remitted to the Tennessee Department of Revenue, and county lodging tax, remitted to county tax authorities. Short-term rental hosts in Tennessee are required to register with both state and county tax authorities and file regular sales/lodging tax returns.
Major short-term rental marketplaces such as Airbnb and Vrbo are required to collect lodging taxes on transactions they facilitate in Tennessee. If a marketplace collects all lodging tax for a property, the operator doesn’t need to file state sales tax returns. However, if taxes aren’t being collected for a host, such as when guests book directly rather than through a marketplace, the host is responsible for collecting and remitting lodging taxes.
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 Tennessee, 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.