Maine 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 Maine. 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, HomeAway, and 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, motel, and B&B stays, short-term rentals in Maine are subject to tax. Tax authorities expect short-term vacation rental hosts to collect 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 short-term rental operators in the short term, but the sharing economy is increasingly being placed under the proverbial microscope. It’s recommended that you address compliance before tax authorities address it for you.
Avalara 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.
Disclaimer: No short-term vacation rental tax guide is a substitute for professional tax advice. Consider it 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, you may not have experience with lodging taxes, but you are 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 and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
In contrast, a lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that is added to the price of the bill. The guest pays the tax, but you are responsible for collecting the tax and paying it to the proper tax authority.
Taxes on short-term rentals can be known as sales tax, sleeping room tax, transient tax, lodging tax, occupancy tax, bed tax, tourist tax, and more. In Maine, you will collect state sales tax from your guests.
What is the definition of “short-term rental” in Maine?
In Maine, “Rental of living quarters in a hotel, rooming house, tourist or trailer camp” are subject to lodging taxes. This applies to the short-term rental of both whole homes and single rooms. Stays of 28 or more consecutive days are not subject to lodging tax if the rental is the guest’s primary residence or the guest is living away from his or her primary residence in connection with education or employment.
It is important to note that local communities may have their own definitions. Check with your local tax authority for the most up-to-date information.
Who is 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 authorities. You may be the property owner, a renter subletting a room, a third-party property management firm, or other party.
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.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. You can use our lodging tax lookup tool to get a rate report specific to your Maine address. The report includes the total tax rate to collect from guests, 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 Authorities
Before you can begin collecting taxes on your short-term rental in Maine, you are legally required to register with Maine Revenue Services. You can register online. When you register, you will receive a Retailer’s Certificate as well as instructions on filing your lodging taxes.
Do I need to form an LLC?
In Maine, you do not need to form an LLC in order 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 (HOA) 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 rules and 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 are ready to start collecting sales 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, state sales tax applies to your short-term rental.
|Tax Name||Filed and Remitted To|
|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 important to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues. State authorities should have the latest rates posted. You can also use our lodging tax lookup tool to find the right rates.
What charges are taxable?
In Maine, all charges that are mandatory in order for the guest to stay at your short-term 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 you keep 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 platform (such as Airbnb, HomeAway, or 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. Some vacation rental platforms, including Airbnb, HomeAway, and VRBO, collect Maine short-term rental taxes for you when the listing is booked.
If you rent your home through an online platform, be sure to identify which taxes are being collected and remitted on your behalf to avoid mistakenly collecting tax twice or failing to collect at all.
At the time of this guide’s publication, Airbnb, VRBO, and HomeAway collect state sales tax for all hosts in Maine.
Even if your online rental platform collects taxes for you, do not assume that the platform is taking care of short-term rental tax registration or filing for you. When rental platforms collect lodging taxes in a particular jurisdiction, they do not file lodging tax returns on behalf of individual hosts. Rather, they pay a lump sum to the jurisdiction and often do not share identifying information on hosts. That means it’s up to hosts themselves to report how much lodging tax has been collected and paid on their 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 his or her 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 short-term rental tax returns online. In order to file, you will need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due, usually via check or electronic transfer. The 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 will be assigned a filing frequency and due dates when you register with the tax authority. At the state level, annual, semiannual, quarterly, and monthly due dates are as follows:
|Filing Frequency||Due Date|
|Annually||Due the 15th of the month following the close of the filing period.|
|Semi-annually||Due the 15th of the month following the close of the filing period.|
|Quarterly||Due the 15th of the month following the close of the filing period.|
|Monthly||Due the 15th of the month following the close 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 you had 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 Maine on time may result in late fees, interest payments, and in extreme cases, legal action.
I have been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but are 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 transient occupancy tax filing?
Yes. Many short-term rental hosts in Maine file several lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.