Connecticut vacation rental tax guide

With a bounty of popular destinations including Mystic, Hartford, and New Haven, the Constitution State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Connecticut are subject to lodging taxes. Failure to comply with 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 Connecticut short-term rental tax laws at the state level. Local jurisdictions such as cities or counties may have their own lodging tax rules. 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 lodging 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 Connecticut tax laws.

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

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

In Connecticut, the short-term rental of all or a portion of a home is subject to room occupancy tax.Rental contracts for a period of less than 90 days, including month-to-month contracts, are considered STRs subject to room occupancy tax for the first 30 days of occupancy. Room occupancy tax does not apply to rental contracts of any length if the owner or operator does not provide furniture for the occupancy.
 

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

If you collect payment directly from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting lodging taxes to Connecticut authorities.

However, if you offer STR rentals exclusively through STR rental facilitators such as Airbnb or Vrbo that are collecting lodging taxes for you, you’re not required to collect lodging taxes.
 

Location is key to compliance

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

Local short-term rental regulations

Connecticut municipalities have explicit power to regulate STRs under state law. STR operators in Connecticut should be aware of the local regulations that apply to them, including rules covering:

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

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.

Before you can begin collecting taxes on your STR in Connecticut, you’re legally required to register with the Connecticut Department of Revenue Services. You can register online to receive a tax registration number.

However, if you offer STRs exclusively through one or more STR facilitators such as Airbnb or Vrbo, you’re not required to register with the Connecticut Department of Revenue Services.

Once you’ve 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 Connecticut short-term rentals?

In Connecticut, STRs are subject to state room occupancy tax.

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 Connecticut address.
 

What charges are taxable?

In Connecticut, all charges associated with occupancy, including accommodations, amenities, and services, whether separately stated or included, are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc.
 

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

In Connecticut, “short-term rental facilitators” such as Airbnb and Vrbo are required to collect and remit room occupancy tax on their hosts’ behalf.

However, if you offer STR rentals directly to guests, you’re required to register with the state and fulfill all lodging tax obligations on those rentals.
 

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in Connecticut. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. Accommodations purchased by buyers including state-designated exempt organizations or qualifying government agencies may be exempt from lodging taxes. Guests may be required to present exemption certificates. Sales of accommodations by federally recognized “Indian tribes” located in “Indian country” are not subject to Connecticut lodging tax.

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Connecticut Department of Revenue Services. In Connecticut, you can file and pay the tax amount due online unless you obtain a waiver to file with a paper return. The Connecticut Department of Revenue Services allows credit card payments, but you may be charged convenience fees for this type of payment.
 

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. For filing with the Connecticut Department of Revenue Services, due dates are as follows:

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 Connecticut Department of Revenue Services?

Yes. STR operators registered with the Connecticut Department of Revenue Services are required to file returns each assigned filing period, regardless of whether you had any short-term rental income or collected lodging taxes. Such returns are commonly known as “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. Tax authorities are becoming more aggressive in their efforts to identify individuals and businesses breaking tax laws.

Failure to register with tax authorities and file lodging tax returns in Connecticut 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 an STR but not collecting lodging taxes, you may be in violation of Connecticut 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 hosts in Connecticut 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 Connecticut Department of Revenue Services. 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 lodging tax filing?

Yes. Many STR operators in Connecticut file several state lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.