Do I have to collect taxes on cleaning fees for my short-term rental property?

Being a short-term rental host is a great way to make extra money, but the reality is: Operating a short-term rental property is a business. And becoming a business owner comes with a learning curve when it comes to things like local laws and other requirements business owners have to follow — including taxes.

If you're offering a property for rent for short terms on platforms such as Airbnb or Vrbo — or on your own — chances are you need to collect lodging taxes on the amounts you're charging your guests. These are known as transient occupancy taxes, hotel taxes, bed taxes, and more.

Lodging tax requirements are very specific to each location and can vary dramatically. But they all must be paid by guests as a percentage of the accommodation rental cost. Your job, as the host, is to collect the tax from guests and pass it on to the appropriate tax authority.

Mandatory vs. optional

Taxes are not always simple or easy to understand, and lodging taxes are no exception. As you learn more about specific requirements, questions are bound to come up. One very common question for short-term rental hosts is: Do I need to charge lodging tax on cleaning fees?

The short answer, generally, is yes. As with anything tax related, laws are very local in nature and you need to check out the specific rules that apply to you. But it’s helpful to understand why cleaning fees are almost always taxable.

In most tax jurisdictions, anything the host requires the guest to pay in order to use the accommodation is considered part of the rental fee. This includes charges such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc., whether stated separately or rolled in to the overall price of the accommodation. If it’s a non-negotiable, nonrefundable fee that’s mandatory in order to use the rental, it’s generally taxable.

Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes unless the host keeps the deposit. The same is true for optional cleaning fees. If you charge your guests fees for optional laundry services they choose to use, or a fee for arranging dry cleaning for them, for example, these most likely are not subject to accommodations taxes.

Watch out for other taxes

However, be aware that while extra services or other fees may not be subject to lodging tax, they could be subject to sales tax or another tax.

In many locations, the total taxes paid by guests on lodging are often a combination of lodging taxes that are specific to accommodations and sales taxes that apply to a range of goods and services, including accommodations. Sales taxes can also be due on services you provide even if they aren’t covered by the accommodations tax. This is highly dependent on the tax jurisdiction and the rules can vary widely.

In Utah, for example, a list of charges subject to both sales tax and transient room tax for vacation rentals includes items such as “cleaning fees,” “reservation fees” and “smoking fees.” “Laundry / dry cleaning services” is included under the list of charges subject only to sales tax.

And in Scottsdale, Arizona, a local “transient tax” is assessed on short-term rentals, in addition to the statewide “transaction privilege tax,” Arizona’s unique form of sales tax. The transient tax is due on “income from charges for lodging,” which can include no-show revenue, cancellation revenue, and resort fees. On the other hand, “nonrefundable deposits” for cleaning, pet fees, maintenance, etc., are not subject to transient tax, but are subject to the general transaction privilege tax.

It often takes close scrutiny of the rules in your state, county, and/or city to figure out what you need to do when it comes to taxes on your short-term rental. You can also get help. Services such as MyLodgeTax can manage lodging tax compliance for you so you can be sure you’re getting it right without having to become a tax expert.

If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.