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

Operating a short-term rental (STR) property can come with a steep learning curve in terms of the local regulations you have to follow. This includes taxes. If you’re operating an STR on your own or via marketplaces such as Airbnb or Vrbo, you may be required to charge your guests lodging taxes on top of their rental bill. These are known as transient occupancy taxes, hotel taxes, bed taxes, and other names, depending on the jurisdiction.

Lodging tax requirements are specific to each location and can vary dramatically. But in general, they are charged to guests as a percentage of the accommodation cost. As the host, your job is to collect the tax from guests and pass it on to the appropriate tax authority.

Taxes aren’t always simple or easy to understand, and lodging taxes are no exception. As you learn more about the 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?

For the most part, the short answer is yes. As with anything tax related, laws are local in nature so it’s important to check out the specific rules that apply to your STR’s location. 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 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 into the overall price of the accommodation. If it’s a nonnegotiable, nonrefundable fee that’s mandatory 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 — but it’s always a good idea to check your local rules to make sure.

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 jurisdictions, 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. Sales taxes may 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 “resort 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 STR lodging taxes. You can also get help. Avalara 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.