Texas vacation rental tax guide

With a bounty of popular destinations including Austin, Dallas, the Alamo, and Big Bend National Park, the Lone Star State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Texas are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and interest 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 Texas 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 Texas tax laws.

Lodging tax is calculated as a percentage of the cost of your guest’s stay and added to the price of 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 Texas?

In Texas, state hotel occupancy tax applies to any building in which members of the public rent sleeping accommodations for $15 or more per day. Local hotel taxes apply to sleeping rooms costing $2 or more per day. Lodging taxes apply to hotels, motels, and bed-and-breakfasts, as well as condominiums, apartments and houses rented for less than 30 consecutive days. Local tax authorities may have their own additional requirements.

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

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 Texas tax authorities. Local jurisdictions may have their own requirements.

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 Texas 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 Texas 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 Texas, you’re legally required to register with the Texas Comptroller’s Office to receive a hotel tax permit.

If all your rentals go through a marketplace provider such as Airbnb or Vrbo that has certified they will collect lodging taxes for you, you’re not required to hold a Texas tax permit, but you must keep records of your marketplace sales for at least four years.

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 lodging taxes apply to Texas short-term rentals?

In Texas, STRs are subject to state hotel occupancy tax and may be subject to local lodging taxes, depending on the jurisdiction.

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 Texas address.

What charges are taxable?

Texas imposes lodging tax on revenues from short-term stays. This includes fees such as pet fees and cleaning fees. Cancellation fees are taxable, but fees for early or late departure are not. Other optional charges may be subject to sales tax, but not lodging taxes.

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

In Texas, “marketplace providers” such as Airbnb and Vrbo must collect, report, and remit state-administered lodging taxes for rentals facilitated by them and certify to STR operators that they will collect lodging taxes on their behalf.

Are guests ever exempt from taxes?

• There are situations in which you aren’t required to collect lodging taxes in Texas. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. Some guests, including federal government agencies, foreign diplomats, Texas state officials, nonprofit entities, religious organizations, qualified charitable organizations, and educational organizations may be exempt from state and/or local lodging taxes with required documentation.

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Texas Comptroller’s Office. In Texas, you can file returns and pay tax online or by mail. The Texas Comptroller’s Office allows credit card payments, but may charge a fee. You may also need to file lodging tax returns with local tax authorities.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the Texas Comptroller’s Office. For state hotel occupancy tax returns, due dates are as follows:

Local tax authorities may have their own due dates for local lodging tax returns.

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the Texas Comptroller’s Office?

Yes. STR operators registered with the Texas Comptroller’s Office 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 violating tax laws. Failure to register with tax authorities and file lodging tax returns in Texas 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 Texas tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risks.

STR hosts in Texas 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 Texas Comptroller’s Office. 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 Texas file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.