New York 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 New York. 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 New York City and the Hamptons, the Empire 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. Much like hotel, motel, and B&B stays, short-term rentals in New York State 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 penalties. These may not catch up with homeowners 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 New York State 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 New York State 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 tax is paid by the guest, but you are responsible for collecting the tax and paying it to the proper tax authority. There are no deductions for lodging taxes on short-term rentals.
Short-term rental tax can be known as lodging tax, occupancy tax, sales tax, bed tax, tourist tax, and more. The total tax rate that you charge your guests can be made up of several different taxes required by the state and local entities including counties, cities, and towns.
Who is required to collect and file taxes on short-term rentals in New York State?
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 local authorities. You may be the property owner, a renter subletting a room, a third-party property management firm, or other party.
Bungalow rental exemption
In New York State, a bungalow is a single-family living unit with its own kitchen, bathroom, and sleeping rooms that is rented fully furnished. The rental of a bungalow is not taxable as long as no housekeeping services, food services, or other common hotel services (including entertainment or planned activities) are provided. If common hotel services are provided, the rental is taxable as hotel occupancy. The furnishing of linens without the service of changing them does not make a bungalow rental taxable. In addition, the provision of cleaning, laundering, and similar services for an optional and separate charge does not make the rental of a bungalow taxable.
What is the definition of “short-term rental” in New York State?
Short-term rentals in New York State are defined as lasting fewer than 30 consecutive days. Residents with a signed lease for continuous residence longer than this should not be charged short-term rental taxes. It is important to note that this definition may vary from location to location. In Cattaraugus County, New York, for example, short-term rentals are defined as lasting 59 nights or fewer. Check with your local tax authority for the most up-to-date definition.
Location is key to compliance
The location of your rental is a crucial piece of short-term rental tax compliance. Your address will determine which tax jurisdictions you are required to report to, which taxes you need to collect, and your tax rates.
You can use our lodging tax lookup tool to get a rate report specific to your New York State address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, number of required registrations, 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 New York State lodging tax on your short-term rental, you are legally required to register with the New York State Department of Taxation and Finance. You must register at least 20 days before you begin collecting taxes from guests. You can complete registration online. When you register, you will receive a New York State Sales Tax Certificate of Authority as well as instructions on filing your lodging taxes.
You may also be required to register with county or city tax authorities. Be sure to check with them for details.
Do I need to form an LLC?
In New York State, you do not need to form an LLC in order to register with tax authorities.
Along with tax obligations, short-term rental operators may be required to apply for short-term rental permits, business registrations, and more. In New York State, short-term rental operators do not need need a business or short-term rental permit in order to operate a short-term rental, but local communities may have their own requirements.
Short-term rental regulations
Short-term rental operators in New York State should also be careful to consider other laws regulating short-term rentals. A key state law for short-term rental hosts is the New York State Multiple Dwelling Law (MDL).
The MDL applies to “Class A” multiple dwellings, which are residential buildings with three or more units. The MDL prohibits renting out apartments in Class A buildings for fewer than 30 days unless a “permanent resident” is present during the rental period.
Basically, this makes it illegal to rent out an entire unit for fewer than 30 days in these types of buildings. It is also illegal in New York State to advertise short-term rentals that violate the MDL rules.
However, it is legal to rent out part of a Class A unit if the host is present during the guest’s stay, and it is legal to rent out an entire single-family or two-family home.
Local communities in New York State may have their own requirements for short-term rentals, including rules covering
- Neighborhood notification
- Building and housing standards
Homeowner Associations (HOA) located in New York State 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 rental tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to New York State short-term rentals?
In New York State, a number of different lodging taxes may apply to your short-term rental, depending on your location. These can include:
Filed and remitted to
New York State Sales Tax
New York State Department of Taxation and Finance
Local Sales Tax
New York State Department of Taxation and Finance
New York City Hotel Unit Fee
New York State Department of Taxation and Finance
Local Occupancy Tax
Local tax authority
The exact tax requirements for your short-term rental depend on its location.
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.
As of the date this guide was published, the only state-level tax on short-term rentals in New York State is sales tax, at a rate of 4 percent.
However, short-term rentals in New York State may also be subject to local taxes that depend on your specific location. State and local tax authorities should have the latest rates posted. You can also use our New York State lodging tax lookup tool to find the right rates.
What charges are taxable?
In New York State, any amount that guests must pay for their stay is considered part of the rental fee and is taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc., whether they are stated separately or rolled in to the overall price of the accommodation. Basically, if it is a non-negotiable, nonrefundable fee that is mandatory in order to use the rental, it is generally taxable.
Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes unless the host keeps the deposit. Other accommodations charges that are not taxable in New York State include separately stated charges for internet access, charges for laundering clothing, dry cleaning, tailoring, or shoe shining, admission charges for participating in sports events, tickets to performances, and tips.
What happens when my marketplace (Airbnb, HomeAway, or VRBO) collects taxes for me?
Before collecting any short-term rental tax from your guests, you need to understand whether any taxes have already been collected for you. Some vacation rental platforms, including Airbnb, HomeAway, and VRBO, collect some short-term rental taxes for hosts. However, platforms do not collect taxes in all locations, and they may not collect all the state and local taxes you owe.
If you rent your home through an online platform, be sure to identify which taxes (state, local, or both) are being collected and remitted on your behalf to avoid mistakenly collecting tax twice or failing to collect at all. Never assume that all taxes are collected on your behalf.
At the time of this guide’s publication, online rental platforms do not collect state-level sales taxes on behalf of New York State hosts. However, Airbnb does collect local occupancy taxes for several counties in New York State: Broome, Cattaraugus, Cayuga, Cortland, Delaware, Dutchess, Essex, Franklin, Fulton, Livingston, Monroe, Montgomery, Onondaga, Orleans, Otsego, Rensselaer, Schenectady, Schoharie, Schuyler, Seneca, St. Lawrence, Steuben, Sullivan, Tompkins, and Wyoming counties.
Even if your online rental platform is collecting taxes on your behalf, do not assume that the platform is taking care of short-term rental tax registration or filing for you. Often, 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 usually 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. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes. In New York State, exempt groups including religious groups, youth sports groups, charitable organizations, employees of the federal government (including military personnel) and state and local governments who are traveling on official business, and authorized representatives of veterans’ posts or organizations can purchase occupancy without paying sales tax.
Filing Short-term Rental Tax Returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the New York State Department of Taxation and Finance. You can file tax returns with the state 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 New York State Department of Taxation and Finance 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.
If you are registered with any local tax jurisdictions, you will have to file lodging tax returns with them separately.
When do I need to file my returns?
You will be assigned a filing frequency and due dates when you register with the New York State Department of Taxation and Finance. At the state level, annual, quarterly and monthly due dates are as follows:
Due by March 20 each year.
Due the 20th of the month following the close of the filing period.
Due the 20th of the month following the close of the filing period.
While due dates for local tax returns in New York State are often the same as the state’s, this is not always the case. We recommend contacting your local tax authority if you have any questions.
I didn’t rent my New York State property during this filing period. Am I still required to file a tax return for my short-term rental?
Yes. Short-term rental operators registered with the New York New York State Department of Taxation and Finance are required to file returns each assigned filing period, regardless of whether 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 direct 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.
The New York New York State Department of Taxation and Finance places the legal responsibility for short-term rental tax revenue squarely on the shoulders of the host. Failure to register with tax authorities and file sales tax returns in New York State on time may result in penalties and interest, and various civil and criminal penalties may apply if you do not comply with your responsibilities to collect and remit sales tax.
The minimum penalty for late filing in New York State is $50, even if no tax is due for the reporting period. Interest is due on any amount not paid when due and accrues from the due date of the return to the date the tax is paid. Interest is compounded daily, and the rate may be adjusted quarterly.
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 New York State 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 New York State 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 New York State Department of Taxation and Finance. 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 New York State file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.