Tennessee vacation rental tax guide

With a bounty of popular destinations including Nashville, Memphis, Dollywood, and Graceland, the Volunteer State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STRs in Tennessee 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 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 Tennessee 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 Tennessee tax laws.

Lodging tax on a short-term rental is a percentage of the cost of your guest’s stay added to the price of 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 Tennessee?

Rentals of vacation lodging for less than 90 consecutive days are subject to Tennessee state lodging taxes.

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

If you collect payment from short-term guests renting out an apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting lodging taxes to Tennessee 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 your tax rates.

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

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

STR operators in Tennessee 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 Tennessee, you’re legally required to register online with the Tennessee Department of Revenue, even if all your rental transactions go through a marketplace facilitator such as Airbnb and Vrbo.

Once you’re 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 Tennessee short-term rentals?

In Tennessee, STR are subject to state and local sales tax and may be subject to other local taxes.

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 Tennessee address.

What charges are taxable?

Tennessee imposes lodging taxes on the sales price of STRs. This includes all fees that a guest must pay for the rental, such as nonrefundable pet deposits, required cleaning fees, property damage protection fees, etc.

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

STR marketplaces such as Airbnb and Vrbo are required to collect state and local lodging taxes on transactions they facilitate in Tennessee.

You’ re required to register with the Tennessee Department of Revenue and file lodging tax returns even if all of your sales are made through a marketplace. In this case, you’ll report $0 in sales on your return.

If taxes aren’t being collected for you, such as when guests book directly with you rather than through a marketplace, you’re responsible for collecting and remitting lodging taxes to tax authorities.

Are guests ever exempt from lodging taxes?

There are situations in which you aren’t required to collect lodging taxes in Tennessee. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. Purchases by government entities and nonprofit organizations are exempt from state lodging taxes.

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Tennessee Department of Revenue. In Tennessee, you must file returns and pay tax online. The Tennessee Department of Revenue allows credit card payments, but may charge a fee.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the Tennessee Department of Revenue. For lodging tax returns, 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 Tennessee Department of Revenue?

Yes. STR operators registered with the Tennessee Department of Revenue 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 STR 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 violating tax laws. Failure to register with tax authorities and file lodging tax returns in Tennessee 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 Tennessee 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 Tennessee 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 Tennessee Department of Revenue. 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 Tennessee file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.