California vacation rental tax guide

With a bounty of popular destinations including Disneyland, Yosemite National Park, and Napa Valley, the Golden State offers ample opportunity for short-term rental (STR) businesses.

But new income opportunities bring new tax implications. Like hotel stays, California STR stays may be subject to lodging taxes, depending on where they’re located. Failure to comply with lodging tax laws can result in fines and penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you.

Avalara MyLodgeTax put together this guide to help you comply with California lodging 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 STR 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 California tax laws.

Lodging taxes are calculated as a percentage of the cost of your guest’s stay and added to the price on the bill. The guest pays the tax, but you’re responsible for collecting and paying it to the proper tax authority.

What’s the definition of “short-term rental” in California?

For tax purposes, STRs in California are defined as reservations of 30 days or less.

Who’s required to collect and file taxes on short-term rentals in California?

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling in a California jurisdiction that imposes lodging taxes on STRs, you’re likely responsible for collecting, filing, and remitting these taxes to the appropriate tax authorities.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and your tax rates.

Use our lodging tax lookup tool to get a rate report specific to your California 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.

Before you can begin collecting taxes on your STR in California, you’re generally required to register with your local tax authority. You can typically register online, depending on the jurisdiction.

State short-term rental regulations

California law allows cities and counties to levy transient occupancy tax (TOT) on accommodations that are rented out for 30 days or less.

Local short-term rental regulations

STR operators in California should be aware of local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registration
• Building and housing standards
• Advertising
• Neighborhood notification

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Once you’re registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which taxes apply to California short-term rentals?

In California, STRs may be subject to TOT, depending on the jurisdiction.

What’s the tax rate?

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your California address.

What charges are taxable?

In California, each local tax authority determines which STR charges are taxable.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects lodging taxes for me?

Some vacation rental marketplaces collect California lodging taxes for you when the listing is booked. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to tax authorities.

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in California. For example, a guest who rents for more than 30 days is exempt from lodging taxes. Other exemptions depend on the jurisdiction.

After you’ve collected taxes from your guests, it’s time to file your tax returns with your local tax jurisdiction. Lodging tax return due dates depend on your jurisdiction.

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with my local tax authority?

In some California jurisdictions, you’re required to file returns each assigned filing period, regardless of whether you had any STR income or collected any lodging taxes. Such returns are commonly known as “zero dollar returns.” Each local tax authority has its own rules regarding zero-dollar returns.

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses breaking local tax laws. Failure to register with tax authorities and file lodging tax returns in California 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 taxes. What options do I have?

If you’re already operating an STR but not collecting lodging taxes, you may be in violation of 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.

STR operators in California 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 local tax authority. VDAs are offered to encourage cooperation with tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR hosts in California file several local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.