5 tips for researching local lodging tax laws for your short-term rental business

Legal compliance is a key part of operating a short-term rental (STR), whether you’re starting out with your first STR property or expanding to new markets. It’s important to understand what steps you need to take to follow local laws, including permitting requirements, zoning restrictions, safety measures, and more.

In most jurisdictions, lodging tax compliance is another area STR operators should be aware of. Lodging taxes are paid by guests, but the operator adds the tax to the guest’s bill, collects it, and pays it to tax authorities. Often, operators must obtain a tax license and file lodging tax returns.

Lodging tax laws set requirements and responsibilities for this process. Operators who fail to observe the rules can face penalties ranging from hefty fines to losing their permission to operate. Getting a handle on lodging tax regulations from the beginning is critical so you can pay attention to creating a successful business without worrying about running afoul of lodging tax laws.

So how do you find out what lodging tax rules you have to follow? Here are some tips that can help you get the information you need to ensure lodging tax compliance in your area.

Lodging taxes are levied at the local level, which means there are no federal rules that cover all STRs in the U.S. Lodging tax requirements can come from various levels of local government, including your state, county, city, or special districts. When seeking information on the lodging tax rules that apply to you, focus on the jurisdictions in which your property is physically located.

Keep in mind that each tax jurisdiction in which your property is located may potentially have its own lodging tax, so more than one lodging tax may apply to your property. You’ll add all the taxes together when you’re figuring out the rate of tax to charge your guests, but often, you’ll need to send the various taxes separately to different jurisdictions.

Lodging tax is a general term for a tax levied on short-term accommodations such as hotels and STRs. But the official name of the taxes that apply to your property may be something entirely different. Lodging taxes can go by many other names, including:

• Sales tax
• Hotel tax
• Transient tax
• Short-term rental tax
• Rooms tax
• Occupancy tax

The names of the government agencies that administer taxes also vary from place to place. Commonly, tax authority departments will contain the words revenue, taxation, or finance.

Where should you start your search for lodging tax info? Google, of course (or the browser of your choice)! This is generally the fastest and most efficient way to find the info you need to comply with lodging tax laws. 

Start by searching for STR or lodging tax laws in your city or town — many municipalities have a dedicated page to inform operators about the rules to follow, and they’ll generally include lodging tax regulations or point you to where to go for more information. 

You can also check with your county tax authority. Keep in mind that county taxes often only apply to properties in unincorporated areas, but sometimes both city and county taxes may apply to the same property.

It’s important  to check with your state too. Almost every state levies sales or lodging taxes on short-term rentals (with the exception of Alaska, California, and Nevada), so chances are, you’re obligated to comply with state lodging tax requirements.

If you use a marketplace such as Airbnb or Vrbo for STR listing and booking, the platform may have information for you about local lodging taxes. In some cases, the marketplace will automatically add taxes to the guest’s bill, collect taxes when they pay, and remit funds to tax authorities on the operator’s behalf. In this case, the marketplace should let you know which taxes they’re collecting. 

However, not every marketplace collects every lodging tax everywhere. It’s your responsibility to know which lodging taxes apply to your property and whether your marketplace collects taxes for you. If they don’t, you’re liable for complying with tax law.

Remember, even if your marketplace is taking care of compliance for you, you may still have some lodging tax compliance responsibilities. For example, in Washington state, you may still be required to register with the Washington State Department of Revenue or file lodging tax returns even if a marketplace collects taxes on your behalf. Or your marketplace may collect some of the lodging taxes for your property, but not all of them, as is the case in New Orleans, where Vrbo collects city taxes but doesn’t collect Louisiana state taxes.

Here at Avalara MyLodgeTax, we’ve done a ton of research into local STR laws — so you don’t have to start from scratch. We offer several resources to help you get the info you need to know about when it comes to complying with local lodging tax regulations, including our:

• Blog, which covers lodging tax compliance and the latest developments in local STR laws
• Vacation rental tax guides, which cover the basics on lodging tax compliance for each state
• Tax rate lookup tool, which helps you calculate the correct STR tax rate to charge your guests, customized to your property’s address

However, you don’t have to become your own expert in local lodging tax compliance. We can take care of it all for you — getting local tax licenses, calculating rates, filing lodging tax returns, and remitting taxes for every property, all in one place. With MyLodgeTax, you can save time, reduce risk, and manage lodging taxes with confidence, while focusing on making your STR business the best it can be.