Vermont 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 Vermont. 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 Burlington, Stowe, and Woodstock, The Green Mountain State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.
But new income opportunities bring new room tax implications for hotels. Like hotel, motel, and B&B stays, short-term rentals in Vermont are subject to tax. Tax authorities expect short-term vacation rental hosts to collect these 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 hosts in the short term, but the sharing economy is increasingly being placed under the proverbial microscope. It’s recommended that you comply with these tax requirements before tax authorities address it for you.
Avalara has compiled this guide to help you comply with Vermont short-term rental tax laws. For more information on the room tax rates and jurisdictions that apply to your rentals 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 one data point 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 Vermont tax laws, or [MyLodgeTax can confirm and manage all of these requirements once you are a customer.]
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 gross rent your guest pays, which is added to the price of the bill. The guest pays the rental tax, you are responsible for collecting the tax and paying it to the proper tax authorities.
Taxes on short-term rentals can be known as room tax, sales tax, transient tax, lodging tax, occupancy tax, bed tax, tourist tax, and more. In most Vermont locations, the total tax rate you charge your guest is made up of the state room taxes. Taxes required by local entities such as counties, cities, and towns, are rare in Vermont, but there are some.
What is the definition of “short-term rental” in Vermont?
Short-term rentals in Vermont are defined as lasting fewer than 30 consecutive days. Any rentals less than 30 days are required to collect Vermont room tax on all reservations. Residents with a signed lease for continuous residence longer than this should not be charged short-term rental taxes.
Who is required to collect and file taxes on short-term rentals in Vermont?
If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling for 15 days a year or more, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to Vermont authorities. These taxes apply to any short term rentals, whether you are a property owner, a renter subletting a room, a third-party property management firm, or other party.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address will determine the exact tax rate you need to charge your guests and 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 Vermont address. The report includes the estimated total tax rate to collect from guests 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 Vermont, you are legally required to register with the Vermont Department of Taxes. You can register online. When you register, you will receive a Vermont Business Tax Account and license as well as instructions on filing your room taxes.
If you have rentals at more than one location, each location must have its own license and you will file separate tax returns for each. However, you will need only one Vermont Business Tax Account.
If you list your short-term rental through a platform such as Airbnb, which has an agreement with the Vermont Department of Taxes to collect and remit tax on behalf of its hosts, then you are not required to obtain a Vermont tax account. However, you must post the tax account number used by the platform on any online advertisements for the rental.
If you list your rental independently, or with a platform that does not collect taxes for you, you must apply for a tax account, collect taxes, and file returns for any taxes that are not collected from your guests on your behalf.
You may also be required to register with local tax authorities, such as your city. Be sure to check with those agencies for details.
Do I need to form an LLC?
In Vermont, you do not need to form an LLC in order to register with tax authorities.
State short-term rental regulations
Vermont short-term rental hosts who advertise on an internet platform are required to post their tax account numbers on any advertisements. If, however, you use a rental platform such as Airbnb,which has an agreement with the Department of Taxes to collect and remit tax on behalf of its hosts, then you may post the tax account number used by the platform.
Short-term rental hosts must also post a phone number within the rental for the person responsible for the rental property. Hosts must also post contact information for the Vermont Department of Taxes, the Department of Health, and the Department of Public Safety’s Division of Fire Safety.
Local short-term regulations
Short-term rental operators in Vermont 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 Vermont 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.
Collecting Short-term Rental Tax
Once you’re registered with tax authorities, you are ready to start collecting lodging tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to Vermont short-term rentals?
In Vermont, a number of different lodging taxes may apply to your short-term rental, depending on your location. These can include:
|Tax Name||Filed and Remitted To|
|State meals and rooms tax||Vermont Department of Taxes|
|Local option meals and rooms tax||Vermont Department of Taxes|
|Local lodging tax (very few locations)||Local Tax Authority|
Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. The Vermont state rooms tax rate is 9.0%. 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 and local tax 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 Vermont, all charges for the use of the room are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Fees that are refundable, such as damage deposits, are not subject to lodging taxes unless you keep the deposit.
Optional services, other than the use of the room, are not subject to the rooms tax as long as the service charge is separately stated on the guest’s bill. If you are providing meals to your guests and billing them separately, those meals are also subject to meals and room tax. If you sell merchandise to your guests, you must charge sales tax on those items.
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 Vermont short-term rental taxes for you when the listing is booked. However, platforms do not collect taxes in all locations, and they may not collect all the state and local taxes you owe.
At the time of this guide’s publication, Airbnb collects state rooms tax for all Vermont hosts and and local option meals and rooms tax in Brandon, Brattleboro, Colchester, Dover, Killington, Manchester, Middlebury, Montpelier, Rutland Town, St. Albans Town, South Burlington, Stowe, Stratton, Williston, Wilmington, Winhall, and Woodstock. Airbnb also collects city restaurant, hotel, amusements and admissions tax in Burlington.
HomeAway/VRBO do not collect lodging taxes on behalf of their hosts in Vermont.
If Airbnb is the only platform you use to rent your property, you do not need to establish a meals and rooms account with Vermont, because Airbnb will collect and remit the meals and rooms tax on your behalf. However, if you use another site or means to advertise your rental, you must apply for a tax account, collect taxes, and file returns for those reservations.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Vermont. For example, a guest who rents for a long term rather than a short term (30 days) will be exempt from short-term lodging taxes. In Vermont, accommodations purchased by buyers including the U.S. and Vermont governments and diplomatic and consular officials may be exempt from short-term lodging taxes. Make sure you always get a copy of an exemption certificate from an exempt entity.
Filing Rooms Tax Returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the Vermont Department of Taxes and local tax jurisdictions. In Vermont, you can file rooms 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 Vermont Department of Taxes 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, quarterly and monthly due dates are as follows:
|Filing Frequency||Due Date|
|Quarterly||Due the 25th of the month following the close of the filing period.|
|Monthly||Due the 25th of the month following the close of the filing period.|
We recommend contacting your local tax authority if you have any questions about local lodging tax due dates.
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 the Vermont Department of Taxes?
Yes. Short-term rental operators registered with the Vermont Department of Taxes 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."
Are there penalties for filing taxes late?
Whether you choose to offer short-term rentals through a marketplace like Airbnb or directly to the 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 not in compliance with local tax laws. Failure to register with tax authorities and file short-term rental tax returns in Vermont 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 Vermont 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 Vermont 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 Vermont Department of Taxes. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.
Also, MyLodgeTax has programs that can get you caught up with any filings and back taxes due, include VDA’s mentioned above.
Are there options for outsourcing transient occupancy tax filing?
Yes. Many short-term rental hosts in Vermont use filing solutions such as MyLodgeTax to eliminate the headache and burden of managing these requirements.