Colorado law clarifies county powers to regulate STRs

Colorado Governor Jared Polis has signed a bill clarifying local governments’ options for regulating short-term rentals (STRs).

The new law specifically authorizes counties to require short-term rental property owners and agents to include an STR license or permit in online listings. It also gives counties the power to require online marketplaces such as Airbnb and Vrbo, when notified by county authorities, to take listings down for properties that are operating illegally or whose operators have had their license suspended or revoked.

Counties already have the power to regulate short-term rentals via ordinances and zoning. The new legislation clarifies the definition of short-term rentals for county regulation purposes and explicitly establishes the steps counties can take with online marketplaces to ensure compliance.

The measure defines short-term rentals as rentals for less than 30 days, excluding hotel units. It also changes the term “internet hospitality service” to “vacation rental service,” defined as “a person that operates a website or any other digital platform that provides a means through which an owner or owner’s agent may offer a lodging unit, or a portion thereof, for short-term rentals, and from which the person financially benefits.”

The bill is a response to concerns about affordable housing, particularly in resort areas. The issue has been a hot topic and has led several local governments to increase regulation of short-term rentals.

Earlier this year, Summit County approved STR rules that cap short-term rental licenses in certain areas outside of town limits. The new rules are the latest in a series of actions the county has taken to regulate the short-term rental industry.

In April, Larimer County revised its short-term rental regulations to address the impact of STRs on neighborhoods. Among other rules, the new regulations:

• Allow new and existing licenses to be transferred to immediate family members
• Require short-term rentals to be separated by 500 feet in residential zones and 250 feet in Red Feather Lakes
• Require property managers to live within an hour of STR properties so they can respond quickly to issues

In March, Lakewood passed a new law requiring short-term rental operators to have a license and restricting licenses only to properties that are the primary residence of the STR operator. Hosts must show proof of STR liability insurance, among other requirements. The ordinance goes into effect September 1.

Lakewood STR operators must also obtain a city sales and use tax license and an accommodations tax license, collect sales and accommodations taxes from guests, and file lodging tax returns with city tax authorities.

Hosts in Lakewood must also register for a tax license with the state, collect state sales tax and state-administered county and local sales taxes from guests, and file state sales tax returns. 

Hosts are responsible for collecting all required taxes and submitting them to the proper tax authorities unless their short-term rental marketplace collects taxes for them. In Lakewood, Airbnb and Vrbo automatically collect state- and city-administered lodging taxes for their hosts. 

Even if a rental marketplace collects lodging taxes, Colorado hosts are still required to register for a state tax license and file regular lodging tax returns. 

MyLodgeTax can automate and simplify short-term rental tax compliance, including registration and filing with state and local tax authorities. For more on short-term rental taxes in Colorado, see our Colorado vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.