New Memphis law targets criminal activity at short-term rentals

Memphis, Tennessee, has enacted stricter regulations for short-term rentals, establishing procedures and penalties for criminal activity at rental properties in accordance with state law.

Under the changes, repeated criminal incidents at a short-term rental (STR) can result in the property being declared a public nuisance, potentially leading to further legal action and revocation of its STR permit.

• Repeated criminal incidents at STR properties can trigger public nuisance enforcement. Under Memphis’ amended code, three or more qualifying criminal incidents within 24 to 36 months can trigger a formal warning; a fourth incident can lead to court action and complete permit revocation.

• Operators must maintain active permits and operational safeguards. All Memphis STR hosts must hold a city-issued permit, maintain at least $1 million in liability insurance, and designate a local responsible agent who lives within 50 miles of the property.

• Lodging tax obligations apply across city, county, and state levels. Stays are subject to Tennessee state sales tax, Memphis occupancy privilege tax, a local tourism assessment, and Shelby County room occupancy tax.

The new rules require notices to be sent to STR operators when three or more separate, unrelated incidents occur on the same property within 24 months and result in charges related to:

• Sex offenses
• Drugs
• Assault
• Firearms

A fourth qualifying incident within that 24-month period could trigger further legal action, including court proceedings.

For juvenile-related charges, the same process applies, but within a 36-month window.

If a court finds that a property is a public nuisance, it can issue an order of abatement. Any subsequent incident on the property involving the same type of violations as the original nuisance finding can serve as evidence of a nuisance per se, allowing the state to pursue additional legal remedies.

The court may also award statutory damages of $1,000 to $50,000 to property owners in the same ZIP code who file claims alleging that the nuisance property damaged their property values.

The new rules follow several violent incidents at STRs earlier this year.

Memphis’ current STR rules went into effect in 2023 and require STR operators to have a city-issued permit and include their permit number on any advertisement or listing for the property. They must also:

• Provide proof of fire, hazard, and liability insurance coverage of at least $1 million

• Designate a responsible agent who lives within 50 miles of the property and can respond to any issues

• Follow local laws including safety, building, and health codes

STR operators in Memphis are also required to collect the city’s occupancy privilege tax, plus a local $2 per-room, per-night Tourism Improvement District assessment, from guests and remit them to the city. Shelby County also applies room occupancy tax to Memphis STRs.

All Tennessee STRs rented for less than 90 consecutive days are also subject to state and local sales tax, which are remitted to the Tennessee Department of Revenue. STR hosts in Tennessee are required to register with state tax authorities and file regular sales/lodging tax returns.

STR marketplaces such as Airbnb and Vrbo are required to collect lodging taxes on transactions they facilitate in Tennessee. Operators are required to register with the Tennessee Department of Revenue and file lodging tax returns even if all sales are made through a marketplace.

However, if taxes aren’t being collected, such as when guests book directly rather than through a marketplace, the host is responsible for collecting and remitting lodging taxes.

Avalara helps simplify tax and compliance for the hospitality industry through automation. With Avalara MyLodgeTax, STR owners and property managers can register with tax authorities, calculate lodging taxes, prepare and file returns, and remit payment. Avalara is trusted by 200,000+ direct and indirect customers in 75+ countries.

For more on 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.

What qualifies an STR as a public nuisance in Memphis?

A property can face public nuisance proceedings when three or more unrelated incidents occur on the property within 24 months resulting in charges related to sex offenses, drugs, assault, or firearms (or within 36 months for juvenile-related charges). A fourth qualifying incident within that time frame can trigger court action.

What penalties can an STR operator face under the new nuisance law?

Under the nuisance law, STR operators can face permit revocation and statutory damages of $1,000 to $50,000 awarded to neighboring property owners whose property values have been damaged.

What lodging taxes are required for Memphis short-term rentals?

Memphis short-term rentals are subject to Tennessee state and local sales tax, City of Memphis occupancy privilege tax and a $2 per-room, per-night Tourism Improvement District assessment, as well as Shelby County room occupancy tax.