Virginia vacation rental tax guide
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Airbnb 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, Mount Vernon, 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 and B&B stays, short-term rentals in Virginia are subject to tax. Tax authorities require short-term vacation rental hosts to collect applicable 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 vacation rental operators in the short term, but the sharing economy is under increased scrutiny so it’s important to address compliance before tax authorities address it for you.
Avalara MyLodgeTax 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.
No short-term vacation rental tax guide is a substitute for professional tax advice. Consider this 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, while you might not have experience with lodging taxes, you’re probably familiar with income tax. It’s important to understand the difference between the two.
Income tax is reported and paid annually to the federal government and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
Lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that’s added to the price on the bill. The guest pays the tax, but you’re responsible for collecting the tax and paying it to the proper tax authority.
What’s the definition of “short-term rental” in Virginia?
For tax purposes, short-term rentals in Virginia are defined as a stay of fewer than 90 days.
Who’s 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 tax authorities.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental 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 Virginia 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.
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 tax authorities
Before you can begin collecting taxes on your short-term rental in Virginia, you’re legally required to register with the Virginia Department of Taxation. You can register online, and once you’ve registered, you’ll receive a sales tax account number and your Sales Tax Certificate of Registration as well as instructions on filing your lodging taxes.
If all of your transactions in Virginia are conducted through a short-term rental marketplace such as Airbnb or Vrbo, you do not need to register to collect Virginia sales tax.
Depending on your jurisdiction, you may be required to register with your local tax authority and file local occupation tax returns in addition to state registration and filing.
Do I need to form an LLC?
In Virginia, you don’t need to form an LLC to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in Virginia should be aware of the local regulations that apply to them, including rules covering:
- Permits, licenses, and registrations
- 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 short-term rental policies that apply to your property.
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||File and remit to|
|State and regional sales and use tax
||Virginia Department of Taxation
|Regional transient occupancy tax
||Local tax authority
|Local lodging tax||Local tax authority
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 critical to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues.
Our lodging tax lookup tool can give you a rate report specific to your Virginia address. The report includes the estimated total tax rate to collect from guests, required registrations, frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
What charges are taxable?
In Virginia, any charges 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, short-term rental marketplace fees, etc.
What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me?
Before collecting any short-term rental taxes from your guests, you need to be aware of whether any taxes have already been collected for you. In Virginia, vacation rental marketplaces such as Airbnb or Vrbo are required to collect lodging taxes from guests when a short-term rental is paid for. If all of your transactions in Virginia are conducted through a short-term rental marketplace, you do not need to register with the Virginia Department of Taxation or collect Virginia sales tax.
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 state tax authorities.
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 are exempt from short-term lodging 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. In Virginia, you can file returns online. In order to file, you’ll need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due.
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’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the Virginia Department of Taxation, state sales tax due dates are as follows:
|Filing frequency||Due date|
|Monthly||Due the 20th day of the month following the end of the filing period|
|Quarterly||Due the 20th day of the month following the end of the filing period|
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 there was 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 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 not in compliance with 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’ve been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but you’re 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 lodging tax filing?
Yes. Numerous 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.