Arizona vacation rental tax guide
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NOTE: The outbreak of COVID-19 (caused by the coronavirus) may have impacted vacation rental tax filing due dates in Arizona. Please consult your local tax authority for specific details. For more information, visit our ongoing coverage of the virus and its impact on sales tax compliance.
Airbnb and HomeAway/Vrbo have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Sedona, Phoenix, and Flagstaff, the Grand Canyon State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.
But new income opportunities bring new tax implications. Like hotel and B&B stays, short-term rentals in Arizona are subject to tax. Tax authorities require short-term vacation rental hosts to collect applicable short-term rental taxes from their guests and remit them to the proper authorities.
Failure to comply with state and local tax laws can result in fines and interest penalties. These may not catch up with vacation rental operators in the short term, but the sharing economy is under increased scrutiny so it’s important to address compliance before tax authorities address it for you.
Avalara MyLodgeTax has put together this guide to help you comply with Arizona short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.
No short-term vacation rental tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Arizona tax laws.
Short-term rental tax basics
When you start operating a short-term rental, while you might not have experience with lodging taxes, you’re probably familiar with income tax. It’s important to understand the difference between the two.
Income taxes are reported and paid annually to the federal government and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
Lodging taxes on a short-term rental are a percentage of the cost of your guest’s stay that’s added to the price on the bill. The guest pays the tax, but you’re responsible for collecting the tax and paying it to the proper tax authority.
What’s the definition of “short-term rental” in Arizona?
For tax purposes, short-term rentals in Arizona are defined as reservations of less than 30 days.
Who’s required to collect and file taxes on short-term rentals in Arizona?
If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to Arizona tax authorities.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.
Use our lodging tax lookup tool to get a rate report specific to your Arizona rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.
Registering with state tax authorities
Before you can begin collecting taxes on your short-term rental in Arizona, you’re legally required to register with the Arizona Department of Revenue. You can register online and once you’ve registered, you’ll receive a transaction privilege tax (TPT) license as well as instructions on filing your lodging taxes.
Do I need to form an LLC?
In Arizona, you don’t need to form an LLC to register with tax authorities.
State short-term rental regulations
Arizona hosts should be aware of state rules that govern short-term rentals, including:
- Short-term rental hosts must obtain a transaction privilege tax license and display that license on any advertisement, or face penalties.
- Short-term rentals may not be used for nonresidential uses, including for special events that would otherwise require a permit or license.
Local short-term rental regulations
Short-term rental operators in Arizona should be aware of the local regulations that apply to them, including rules covering:
- Providing contact information to authorities
- Occupancy limits
- Health and safety
Homeowner Associations (HOA) located in Arizona may also have specific rules regarding vacation rentals. As a member, it’s your responsibility to be aware of the association’s policy. It’s important to review this information to understand any restrictions or limitations on short-term vacation rentals.
Other regulations associated with leases/subletting or condo/co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.
Collecting short-term rental tax
Once you’re registered with tax authorities, you’re ready to start collecting rental tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to Arizona short-term rentals?
In Arizona, short-term rentals are subject to transaction privilege tax, county excise tax, and local transient occupancy tax.
|Tax name||File and remit to|
|Transaction privilege tax||Arizona Department of Revenue|
|County excise tax||Arizona Department of Revenue|
|Local transient occupancy tax||Arizona Department of Revenue|
Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s critical to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues.
Our lodging tax lookup tool can give you a rate report specific to your Arizona address. The report includes the estimated total tax rate to collect from guests, required registrations, frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
What charges are taxable?
In Arizona, state transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. This means that the gross receipts of transient lodging businesses are subject to TPT. Business owners may pass the tax on to their customers. However, revenue from certain types of services or sales may be taxed under a different category than transient lodging, or may not be taxable at all.
What happens when my short-term rental marketplace (such as Airbnb or HomeAway/Vrbo) collects taxes for me?
Before collecting any short-term rental tax from your guests, you need to be aware of whether any taxes have already been collected for you. Arizona requires all short-term rental online marketplaces, such as Airbnb and Vrbo, to collect and remit state and local taxes on Arizona short-term rentals. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Arizona. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes.
In Arizona, a short-term rental owned by a Native American and located on the reservation of which the owner is a member is exempt from transaction privilege tax - unless the accommodation is booked through an online marketplace such as Airbnb.
Filing short-term rental tax returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the Arizona Department of Revenue. In Arizona, you must file short-term rental tax returns online and pay the tax amount due by check or electronic transfer. The Arizona Department of Revenue allows credit card payments, but may charge a fee.
Take the time to double-check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.
When do I need to file my returns?
You’ll be assigned a filing frequency and due dates when you register with the tax authority. At the state level, due dates for transaction privilege tax are as follows:
|Filing frequency||Due date|
|Monthly||Due the 20th day of the month following the end of the filing period|
|Quarterly||Due the 20th day of the month following the end of the filing period|
|Annually||Due the 20th day of the month following the end of the filing period|
I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the Arizona Department of Revenue?
Yes. Short-term rental operators registered with the Arizona Department of Revenue are required to file returns each assigned filing period, regardless of whether there was any short-term rental income or any short-term rental taxes were collected. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.
Are there penalties for filing taxes late?
Whether you choose to offer short-term rentals through a marketplace like Airbnb or directly to the consumer, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with local tax laws. Failure to register with tax authorities and file short-term rental tax returns in Arizona on time may result in late fees, interest payments, and in extreme cases, legal action.
I’ve been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but you’re not collecting short-term rental taxes, you may be in violation of Arizona tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.
Short-term rental hosts in Arizona may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Arizona Department of Revenue. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.
Are there options for outsourcing lodgings tax filing?
Yes. Numerous short-term rental hosts in Arizona file several lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.