State of the state: Alabama short-term rental rules

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

Alabama offers a quintessential taste of the South, with attractions ranging from Gulf Coast beaches to Huntsville’s U.S. Space and Rocket Center and the Birmingham Civil Rights Institute. For visitors traveling in Alabama, short-term rentals (STRs) are a popular hospitality option.

STR operation in Alabama is largely regulated by local jurisdictions rather than at the state level, except when it comes to tax requirements.

For tax purposes, STRs in Alabama are defined as reservations of less than 180 days. STR operators are legally required to register with the Alabama Department of Revenue. In some jurisdictions, operators may also need to register directly with local authorities. Once registered, you’re responsible for collecting lodging taxes from guests and filing lodging tax returns with tax authorities. 

However, if an STR marketplace such as Airbnb or Vrbo — or another third-party facilitator — collects and remits all state and local lodging taxes for your STR transactions, you don’t need to register with state or local tax authorities.

In Alabama, a number of different lodging taxes may apply to your STR, depending on your location.

All Alabama STRs are subject to state lodgings tax, which is administered by the Alabama Department of Revenue. In some Alabama cities and counties, STRs may also be subject to local lodging taxes. These may be administered by the state or by the local tax authority, depending on the jurisdiction.

Cities and counties may also have their own per-night room fees that are administered by local tax authorities.

In Alabama, the full retail price paid by the guest for an accommodation is taxable. This includes items such as accommodations intermediary fees, cleaning fees, pet fees, and other charges for use or rental of personal property and services furnished in the accommodation. Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes unless the deposit is kept.

In Alabama, accommodations intermediaries are required to collect state-administered lodging taxes when payment is collected from the guest. If you use a marketplace as well as rent directly to guests, you must register with tax authorities and collect and pay lodging taxes. In this case, you should report third-party transactions on state and local lodging tax returns and deduct those transactions to arrive at the taxable amount.

Local governments in Alabama have the power to pass local laws controlling the operation of STRs. Local ordinances may regulate permits, licenses and registration, zoning, occupancy limits, advertising, building and housing standards, and more.

Avalara MyLodgeTax can help STR hosts automate and simplify lodging tax compliance at the local and state level, including tax registration and filing. For more on vacation rental lodging taxes in Alabama, 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.