Washington vacation rental tax guide

With a bounty of popular destinations including Seattle, the San Juan Islands, and Olympic National Park, the Evergreen State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Washington state 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 Washington lodging tax laws at the state level. Local jurisdictions may have their own 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 Washington state 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 Washington state?

Overnight accommodations rented out for less than 30 days in a row are subject to Washington state lodging taxes.

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

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 lodging taxes to Washington state 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 Washington state 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.

Local short-term rental regulations

STR operators in Washington state 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.

Registering with tax authorities

Before you can begin collecting lodging taxes on your STR in Washington state, you’re required to register with the Washington State Department of Revenue. You can register online to receive a Unified Business Identifier (UBI) number. Depending on your jurisdiction, you may be required to register with your local tax authority as well.

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 Washington state short-term rentals?

In Washington state, a number of different lodging taxes may apply to your STR, 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 gives you a rate report specific to your Washington state address.

What charges are taxable?

In Washington state, the total amount charged for the room rental is taxable. This includes charges such as lodging fees, cleaning fees, pet fees, smoking fees, early and late departure fees, damage fees, attrition fees, and no-show fees equal to a full night of accommodation. Additional amounts charged for telephone services, parking, laundry, and the use of meeting or banquet rooms are not subject to lodging taxes.

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

Some online STR marketplaces collect Washington lodging taxes for you when the listing is booked. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities. 

When a marketplace or property manager collects taxes on your behalf, you may still be required to register with the Washington State Department of Revenue and file lodging tax returns.

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in Washington state. For example, a guest who rents for a long term rather than a short term is exempt from lodging taxes. Some transactions are exempt from lodging tax, including sales to certain foreign officials, the U.S. government, federal corporations providing aid and relief, and lodging provided as part of programs to furnish emergency lodging to the homeless.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Washington State Department of Revenue. In Washington state, you can file returns and pay tax online. The Washington State Department of Revenue 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 Washington State Department of Revenue. 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 Washington State Department of Revenue?

Yes. STR operators registered with the Washington State Department of Revenue 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.” 

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 not in compliance with tax laws. Failure to register with tax authorities and file lodging tax returns in Washington state 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 Washington state tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risks.

STR hosts in Washington state 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 Washington State Department of Revenue. 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 Washington state file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.