Virginia 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 Virginia. 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 Colonial Williamsburg and Virginia Beach, Old Dominion 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. Like hotel, motel, and B&B stays, short-term rentals in Virginia 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 interest penalties. These may not catch up with short-term rental operators 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 Virginia 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 Virginia 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 guest pays the tax, but you are responsible for collecting the tax and paying it to the proper tax authority.
Taxes on short-term rentals can be known as transient tax, lodging tax, occupancy tax, sales tax, bed tax, tourist tax, and more. In Virginia, the total tax rate you charge your guest is made up of many different taxes required by the state and local entities such as counties, cities, and towns.
What is the definition of "short-term rental" in Virginia?
Short-term rentals in Virginia are defined as lasting fewer than 90 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. Check with your local tax authority for the most up-to-date information.
Who is required to collect and file taxes on short-term rentals in Virginia?
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 Virginia authorities. You may be the 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 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 Virginia 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 Authorities
Before you can begin collecting taxes on your short-term rental in Virginia, you are legally required to register with the Virginia Department of Taxation. You can register online. When you register, you will receive a 15-digit sales tax account number and your Sales Tax Certificate of Registration as well as instructions on filing your sales taxes.
You may also be required to register with local tax authorities. Be sure to check with them for details.
Do I need to form an LLC?
In Virginia, you do not need to form an LLC in order to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in Virginia should be aware of local regulations that apply to them, including rules covering:
- Permits, licenses, and registrations
- Neighborhood notification
- Building and housing standards
Homeowner Associations (HOA) located in Virginia 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 Virginia short-term rentals?
In Virginia, 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|
|Virginia Sales and Use Tax
||Virginia Department of Taxation
|Regional Sales Tax
||Virginia Department of Taxation
|Regional Transient Occupancy Tax
||Local tax authority
|Local Lodging 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. 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 Virginia, any charges made in connection to the rental that are included on the bill are considered part of the rental fee and are subject to state sales tax. 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 generally not subject to sales taxes. The same is true for separately stated charges from outside service providers, such as dry cleaners. Internet access charges and toll charges for long-distance phone calls are not subject to state sales tax.
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 Virginia 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.
If you rent your property 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.
At the time of this guide’s publication, Airbnb collects Lodging Tax in the Town of Abingdon, Transient Lodging Tax and Regional Transient Occupancy Tax in Alexandria, and Transient Lodging Tax in Blacksburg. HomeAway/VRBO do not collect any taxes on behalf of their Virginia hosts.
Even if your online rental platform collects taxes for you, 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 in Virginia. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes. In Virginia, accommodations for federal employees on official business that are paid directly by the federal government are exempt from sales taxes.
Filing Short-term Rental Tax Returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the Virginia Department of Taxation and local tax jurisdictions. In Virginia, you are required to files state sales 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 Virginia Department of Taxation 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, monthly and quarterly due dates are as follows:
|Filing Frequency||Due Date|
|Quarterly||Due the 20th of the month following the close of the filing period.
|Monthly||Due the 20th of the month following the close of the filing period.
Due dates for local tax returns may be different from the state's. We recommend contacting your local tax authority if you have any questions about local filing 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 Virginia Department of Taxation?
Yes. Short-term rental operators registered with the Virginia Department of Taxation 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.” 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 directly 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. Failure to register with tax authorities and file short-term rental tax returns in Virginia 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 Virginia 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 Virginia 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 Virginia Department of Taxation. 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 Virginia file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.