Michigan vacation rental tax guide

With a bounty of popular destinations including Detroit, Traverse City, and the Upper Peninsula, the Great Lakes State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Michigan are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and penalties. Tax jurisdictions are increasingly making lodging 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 Michigan lodging 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 lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your lodging tax questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Michigan tax laws.

Lodging tax basics

Lodging tax is 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 the STR operator is responsible for collecting the tax and paying it to the proper tax authority.

What's the definition of "short-term rental" in Michigan?

In Michigan, use tax is due on rooms or lodging furnished by hotelkeepers, motel operators, and other persons furnishing accommodations that are available to the public on the basis of a commercial and business enterprise. No tax is due if the room is rented for a continuous period of more than one month to the same tenant.

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

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 lodging taxes to Michigan 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 the appropriate tax rates.

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

• 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.

Registering with tax authorities

Before you can begin collecting taxes on your short-term rental in Michigan, you’re legally required to register with the Michigan Department of Treasury. You can register online. Depending on your jurisdiction, you may also be required to register with your local tax authority and file local lodging tax returns.

Collecting lodging taxes

Which lodging taxes apply to Michigan short-term rentals?

In Michigan, STRs are subject to state use tax and may be subject to local lodging tax, depending on location.

Tax rates

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 Michigan address.

What charges are taxable?

In Michigan, all rental receipts from short-term stays are subject to lodging taxes. This includes charges 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? 

Some STR marketplaces collect Michigan lodging taxes for operators 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 lodging taxes?

There are situations in which you aren’t required to collect lodging taxes in Michigan. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. Other exemptions include accommodations furnished directly to the federal government, state and local government entities, legally qualified nonprofit organizations, and churches.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Michigan Department of Treasury. In Michigan, you can file returns and pay the tax online.

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 Michigan Department of Treasury, state sales and use tax due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the Michigan Department of Treasury?

Yes. STR operators registered with the Michigan Department of Treasury are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. 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 STRs through a marketplace like Airbnb or Vrbo, or directly to guests, 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 breaking tax laws. Failure to register with tax authorities and file STR tax returns in Michigan 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 Michigan 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 Michigan 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 Michigan Department of Treasury. 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 Michigan file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.