The Airbnb Host’s Guide to Occupancy Tax Compliance

Renting your property or extra bedroom on Airbnb is a great way to make the most of your space and increase your income. While signing up with Airbnb is easy, starting to operate an Airbnb business usually presents a learning curve.

One area you’ll need to understand is managing taxes. While you’re probably already familiar with income taxes, operating an Airbnb requires dealing with an entirely different category of tax — occupancy taxes. This guide covers the basics of what you need to know to get started.

Occupancy taxes, also commonly known as lodging tax, room tax, hotel tax, or tourist tax, are taxes that hosts and property managers are required to collect from guests then pay to state and/or local tax authorities when operating a short-term rental. Occupancy taxes are typically a percentage of the cost of the stay, added to the final bill, and they may be paid to the state, county, city, or other local government tax authority.

Depending on location, occupancy taxes may be referred to as lodging taxes, hotel taxes, stay taxes, room taxes, bed taxes, tourist taxes, accommodations taxes, and more. 

Collecting occupancy taxes is an important part of the hosting process. Occupancy tax compliance is required by law and is the responsibility of the host, as stated in Airbnb’s terms:

13.1 As a Host you are solely responsible for determining your obligations to report, collect, remit or include in your Listing Fees any applicable VAT or other indirect sales taxes, occupancy tax, tourist or other visitor taxes or income taxes ("Taxes").

As a taxpayer in the United States, you’re most likely familiar with filing income taxes every year by April 15. You generally pay these taxes to the federal government, and perhaps your state, once a year as a percentage of your annual income.

Occupancy taxes, on the other hand, are paid by your short-term rental guests rather than out of your pocket. While the guest pays the tax, you as the host are responsible for collecting it and remitting it to tax authorities.

Unlike income taxes, occupancy taxes are not paid to the IRS, but to state and local governments, usually each month or quarter. There is no federal occupancy tax. This means that there are no national rules for occupancy taxes and that the requirements that apply to you depend entirely on the exact address where your short-term rental is located.

Occupancy tax compliance involves four main steps: 

1. Registering your Airbnb with tax agencies

Before you can begin collecting occupancy taxes, you need to register with tax agencies. You may receive a license or permit when you register, depending on the jurisdiction. Keep in mind that you may have to register with more than one tax agency if your short-term rental property is governed by more than one jurisdiction, such as both the city and state.

Tip: When researching taxes or registering, the state agency you need to contact is often called the Department of Revenue. At the city and county level, look for the Finance Department, Tax Collector, or Treasurer’s Office — but those departments may have other names.

Sometimes, states will collect all local taxes on behalf of each city and county, so that you only have to register with one agency, but that’s not universal. It’s crucial to make sure you understand what’s required for your specific short-term rental property and the different city, county, and state agencies involved.

Once you register, you’re allowed to start renting and collecting taxes from guests. You should receive instructions from each tax agency on filing and remitting your returns, such as what forms you should file, when they’re due, and your filing frequency.

2. Determining the amount of taxes to collect

The first step in determining the correct tax rate is knowing which tax jurisdictions govern your rental. This may be a state, county, city, or other jurisdiction, and your rental may be located in more than one jurisdiction. Each jurisdiction may levy its own taxes, so you may be required to collect several different taxes from your guests.

Once you know the tax rates for each of the jurisdictions that govern your vacation rental, you add them all together to get the final rate you’ll charge your guests. For example, a total tax rate of 10 percent may include 6 percent state tax, 2 percent city tax, and 2 percent county tax.

3. Collecting occupancy taxes

Lodging taxes are added to the rent amount you charge your guests and collected at the same time a guest pays the bill. For instance, if your nightly rate is $150 and the total tax is 10 percent, you would bill your guest $165 ($150 for rent plus $15 for occupancy taxes). 

Some vacation rental platforms provide a tax rate field, usually in the area where you set up your nightly rate and any fees (such as cleaning fees). You can add the tax rate here and the platform will automatically charge the tax to your guest. Airbnb, however, does not have a tax rate field, so Airbnb recommends you collect taxes manually, either in person from guests during check-in, or via the Resolution Center after check-in. Either way, it’s important to let guests know the exact tax amount before booking.

It’s best practice to keep track of the total amount you receive from guests and the tax amount paid by them so you have those funds available when it comes time for you to file your tax reports and pay any taxes owed. 

Tip: Many rental operators will deposit the taxes they’ve received from guests into a separate bank account to ensure they have this money available. 

4. Filing short-term rental tax returns

Once you register and start collecting occupancy taxes on your Airbnb, you must file and pay the taxes. The tax agencies determine how often you’re required to file, when the taxes are due, and what forms you must use. Most taxes can be filed and paid online. 

While most tax agencies require occupancy tax returns to be filed on a monthly basis, your required frequency may be quarterly, semiannually, or even annually. Keep in mind that if you’re paying taxes to more than one jurisdiction, you may have more than one filing frequency or deadline. For example, your state taxes may be due quarterly while your city taxes might be due monthly.

When you file your taxes, you’ll report the amount of revenue (rent plus mandatory fees) you’ve received for your short-term rental for a specific period on the tax return form. You’ll need to pay the correct percentage of occupancy tax owed on that revenue. 

In many jurisdictions, Airbnb has agreements with tax agencies to collect taxes on behalf of hosts. In these instances, tax is collected when payment is accepted from guests. Airbnb then remits the taxes to the appropriate tax agency. In locations where Airbnb collects taxes, the host does NOT have to collect or remit the same taxes. Airbnb handles it for you.

However, Airbnb does not have agreements with all jurisdictions in the U.S., so it may not collect all the occupancy taxes in your area. And it may have agreements with some of the jurisdictions that govern your rental, but not others.

For example, Airbnb may have an agreement with your state but not your city, so Airbnb would collect state taxes for you from guests, but not city tax. Airbnb states on its site that any taxes not collected by Airbnb are your responsibility.

Furthermore, keep in mind that Airbnb does not register your property with tax authorities or file tax returns for you — even if it collects and pays taxes for you. And some tax agencies require hosts to continue to file tax returns, even if Airbnb collects taxes on their behalf.

In Washington state, for example, hosts are required to file excise tax forms on which they report their short-term rental revenue and take the amount of tax that Airbnb has collected for them as a deduction.

While Airbnb collection can make occupancy taxes easier for you, it’s crucial to understand that as a short-term rental host, you’re ultimately responsible for occupancy tax compliance. It’s up to you to know what Airbnb takes care of and to fill in the gaps.

The table below provides information about the tax jurisdictions for which Airbnb currently collects and remits tax on behalf of hosts. We recommend visiting Airbnb’s occupancy tax collection and remittance page for details specific to the location of your property.

as of July 2019

Lodging taxes can be complicated, and it can take a lot of time to be certain you’re getting them right. Avalara MyLodgeTax can help by automating occupancy tax compliance. MyLodgeTax takes care of registering your short-term rental for the correct jurisdictions, determines the exact tax rate to charge, prepares your occupancy tax returns, and makes sure they’re filed and paid on time.