Study: Many short-term rental operators lack confidence they’re doing lodging taxes right

Short-term rental (STR) operators spend a lot of time on lodging tax compliance — yet many don’t feel confident they’re getting it right. According to a recent Avalara report, 44% of U.S. lodging operators polled say they only feel “somewhat confident” their business is compliant with lodging tax rules, and 45% say they only feel “somewhat prepared” to adapt to new or updated lodging tax requirements moving forward.

The report, Checked In, Taxed Out: Benchmarking Tax Compliance in the U.S. Lodging Industry, is based on a Censuswide survey of 250 hotel operators and 250 STR operators responsible for their businesses’ finance operations.

Across the country, state and local governments have been active in changing the lodging tax landscape. In Colorado, for example, several communities voted in the November 2025 election to increase lodging taxes or levy them for the first time. Among other jurisdictions, San Diego and several Utah counties raised lodging taxes in 2025, and Rhode Island raised lodging tax rates statewide beginning January 1, 2026. 

Local leaders are also increasingly applying lodging taxes specifically to STRs. In Illinois, for example, STR properties became subject to the state Hotel Operators’ Occupation Tax in 2025. And with the passage of “junk fee” laws at the federal level and in several states, STR operators are required to more transparently display the cost of lodging stays.

This complexity means members of the STR industry are spending plenty of time trying to keep up with lodging tax. According to the Censuswide survey, 42% of STR operators spend 51–100 hours annually on lodging tax compliance, while 23% of respondents spend 101–200 hours each year.

Heightened scrutiny on lodging tax compliance also means the stakes are getting higher. Local governments are increasingly taking measures to ensure STR operators comply with lodging tax rules, including in Sarasota, Florida. Communities are also increasingly turning to third parties to help them find violators.

Technological solutions can help STR operators cut down the time they need to spend on lodging tax and reduce the risk of penalties by automating the trickiest aspects of compliance. That said, many STR operators have yet to fully embrace automation. 

In the STR sector, 65% of those surveyed say they manage their finances and tax calculations with partially automated systems, with some manual or fully manual processes. This is changing — 81% of STR operators say they’ve modernized their core operating systems within the past three years, while 35% say they’ve done so within the past 12 months. 

However, less than half (44%) of all lodging providers surveyed are using advanced AI-powered software for tax compliance. Many of those surveyed are simply cautious: 47% of those not currently using AI-powered compliance tools cite concerns about accuracy and/or reliability as the main reason for lack of adoption. 

At the same time, lodging providers are also curious: Across the hotel and STR sectors, the areas of greatest interest in technological innovations were “access to up-to-date tax rates by location” (46%), “AI-powered alerts for tax changes” (47%), and “better integration between booking, property management, and tax systems” (50%).

As lodging tax compliance continues to evolve, STR operators will need to adapt as well, further leveraging technology to stay ahead of lodging tax requirements and away from issues with tax authorities.

Avalara is the agentic tax and compliance leader, supporting more than 43,000 businesses and government entities across over 75 countries. For STR owners and property managers, Avalara MyLodgeTax helps automate lodging tax registration, rate calculation, filing, and remittance. By simplifying complex occupancy tax requirements, Avalara helps STR businesses reduce risk and save time as they grow.Designed especially for STRs, Avalara MyLodgeTax automates and simplifies lodging tax compliance, including registration and filing with state and local tax authorities. If you have tax questions related to your STR, drop us a line and we’ll get back to you with answers.