What’s in store for lodging in 2026: Avalara Tax Changes report

Short-term rental (STR) operators in the United States are used to challenges and changes — they’re simply part of doing business. And 2026 offers plenty of both, especially when it comes to lodging taxes. But there are rewards in store too — specifically on the technology front, which is evolving to help the STR industry adapt and thrive.

This landscape is laid out in our 10th annual Avalara Tax Changes report, a comprehensive look at the past year’s tax developments and what to expect in 2026 and beyond. The report identifies several tax trends that will affect how STR operators do business.

Tax compliance for STRs keeps getting more complex. State and local governments are increasingly looking for ways to boost revenues by adding new taxes and expanding the taxpayer base for existing taxes. For example, Illinois expanded its Hotel Operators' Occupation Tax to include STRs for the first time, while Rhode Island introduced a new tax on whole-home STRs.

State and city governments (and sometimes, voters) regularly raise lodging tax rates. In San Diego, for example, a ballot measure raised the transient occupancy tax (TOT) rate. STRs are now taxed in three different zones with different rates: 11.75%, 12.75%, and 13.75%, respectively, based on proximity to the San Diego Convention Center. States are also allowing local governments to levy higher lodging taxes. For instance, Utah amended its laws to allow counties to increase transient room tax (TRT) by 0.25% to a maximum of 4.5%, and several counties have already taken advantage of the law to hike rates.

Tax authorities are paying more attention to online transactions, including expanding the definitions of terms such as “marketplace facilitators” to include more types of businesses — especially in the lodging sector. Louisiana, for example, expanded its marketplace facilitator definition to include accommodations intermediaries.

Local governments are also focusing on enforcement, cracking down on compliance violations with stronger laws, technology that helps find rule-breakers, an increase in audits, and even tax amnesty or special voluntary disclosure programs as incentives for tax compliance.

As lodging tax complexity rises, a consistent pain point for STR operators is the growing amount of time and effort required to stay compliant. According to an Avalara report, 42% of STR operators surveyed spend 51–100 hours annually on lodging tax compliance, while 23% of respondents spend 101–200 hours each year. 

However, many don’t feel confident they’re getting it right — 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.

In this environment, having the right technology is essential. Avalara MyLodgeTax uses automation to help STR owners and property managers register with tax authorities, calculate lodging taxes, prepare and file returns, and remit payment — saving time and ensuring compliance. Avalara is trusted by 200,000+ direct and indirect customers in 75+ countries. 

For more on the lodging tax trends to look for in 2026 and beyond, see the full version of the Avalara Tax Changes 2026 report.