Vermont vacation rental tax guide

With a bounty of popular destinations including Burlington, Stowe, and Woodstock, the Green Mountain State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STRs in Vermont 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 Vermont lodging tax laws at the state level. Local jurisdictions 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 Vermont 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 and paying it to the proper tax authority.

What’s the definition of “short-term rental” in Vermont?

STRs are defined as a furnished house, condominium, or other dwelling room or self-contained dwelling unit rented to the transient, traveling, or vacationing public for a period of fewer than 30 consecutive days and for more than 14 days per calendar year. This includes both entire units and single rooms.

Who’s 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 lodging taxes to Vermont 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 Vermont 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. Tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Registering with tax authorities

Before you can begin collecting taxes on your STR in Vermont, you’re required to register with the Vermont Department of Taxes for a Vermont Business Tax Account and license.

If you only rent your property via a marketplace, you don’t need to register with the state or collect tax yourself. If you rent on a marketplace but also rent independently, you must register with the state and collect and remit the tax for any stays booked outside of the marketplace.

Depending on your jurisdiction, you may be required to register with your local tax authority and file local lodging tax returns in addition to state registration and filing.

Local short-term rental regulations

STR operators in Vermont 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.

Collecting lodging taxes

Once you’ve 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 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 rates

Before you can begin collecting STR 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 Vermont address.

What charges are taxable?

In Vermont, all charges for the use of the rental are taxable. This includes charges such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Forfeited deposits are subject to rooms tax. Optional services, other than the use of the room, are not subject to rooms tax as long as the service charge is separately stated on the guest’s bill. If the host provides meals to guests and bills them separately, those meals are also subject to meals and rooms tax. If the host sells merchandise to guests, they must charge sales tax on those items.

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

Marketplaces are responsible under Vermont law to register with the Department of Taxes and collect state meals and rooms tax, local option tax (if applicable), and the short-term rental surcharge. If you only rent your property via a marketplace, you don’t need to register with the state or collect taxes yourself.

Depending on your jurisdiction, you may be required to register with your local tax authority and file local lodging tax returns in addition to state registration and filing.

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 is exempt from short-term lodging taxes.

In Vermont, accommodations purchased directly by organizations including the U.S. and Vermont governments and diplomatic and consular officials are exempt from lodging taxes.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Vermont Department of Taxes. In Vermont, you can file returns and pay tax online. The Vermont Department of Taxes allows credit card payments, but you may be charged convenience fees for this type of payment.

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 Vermont Department of Taxes, 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 Vermont Department of Taxes?

Yes. STR 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 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. 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 Vermont 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 Vermont tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risks.

STR 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.

Are there options for outsourcing lodging tax filing?

Yes. Many STR operators in Vermont file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.