Maine vacation rental tax guide
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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 Portland, Bar Harbor, and Acadia National Park, the Pine Tree 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 Maine 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 Maine 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 Maine 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 tax is 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 tax on a short-term rental is 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 Maine?
For tax purposes, short-term rentals in Maine are defined as reservations of fewer than 28 consecutive days.
Who's required to collect and file taxes on short-term rentals in Maine?
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 Maine tax authorities.
However, if you have only one rental property and rent it out for fewer than 15 days per year, you are not required to collect lodging taxes on those stays. If the property has been placed in the hands of a real estate agent or other person engaged in the business of renting or managing rentals of living quarters, that agent must collect and report sales tax on the rental.
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 Maine 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 Maine, you’re legally required to register with Maine Revenue Services. You can register online, and once you’ve registered, you’ll receive a Retailer’s Certificate as well as instructions on filing your lodging taxes.
Do I need to form an LLC?
In Maine, you don’t need to form an LLC to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in Maine should be aware of local regulations that apply to them, including rules covering:
- Permits, licenses, and registration
- Neighborhood notification
- Building and housing standards
Homeowner Associations (HOAs) located in Maine 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’ve 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 Maine short-term rentals?
In Maine, short-term rentals are subject to state sales tax.
|Tax name||File and remit to|
|State sales tax||Maine Revenue Services|
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 Maine 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 Maine, all charges that are mandatory for a guest to stay at a rental are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. However, optional extra fees, such as for laundry services, are not subject to sales tax.
Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes unless the host keeps the deposit. Cancellation fees are also not subject to tax, as long as the guest cancels on or before the scheduled date of arrival. However, any amount forfeited because the guest does not show up is taxable.
What happens when my short-term rental marketplace (such as Airbnb or HomeAway/Vrbo) collects taxes for me?
Before collecting any short-term rental taxes from your guests, you need to be aware of whether any taxes have already been collected for you. Some vacation rental marketplaces collect Maine short-term rental 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 state tax authorities. Check with your marketplace for the latest information on which taxes they’re collecting on your behalf.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Maine. For example, a guest who rents for 28 days or more who does not have another primary residence, or who is living away from their primary residence in connection with school or work, is exempt from short-term lodging taxes. In Maine, purchases of accommodations by federal, state, or local government agencies, nonprofit organizations, or students for school attendance may be exempt from state sales taxes.
Filing short-term rental tax returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with Maine Revenue Services. In Maine, you can file returns online. In order to file, you’ll need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due. Maine Revenue Services allows credit card payments, but you may be charged convenience fees for this type of payment.
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. For filing with Maine Revenue Services, due dates are as follows:
|Filing frequency||Due date|
|Monthly||Due the 15th day of the month following the end of the filing period|
|Quarterly||Due the 15th day of the month following the end of the filing period|
|Semiannually||Due the 15th day of the month following the end of the filing period|
|Annually||Due the 15th 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 Maine Revenue Services?
Yes. Short-term rental operators registered with Maine Revenue Services 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.”
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 tax laws. Failure to register with tax authorities and file short-term rental tax returns in Maine 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 Maine 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 Maine 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 Maine 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 lodgings tax filing?
Yes. Numerous short-term rental hosts in Maine file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.