What charges are subject to lodging tax?

Updated June 25, 2024

Lodging tax compliance is an important part of running a short-term rental (STR). Operators have an obligation to collect lodging taxes from guests and remit them to tax authorities. In most cases, these taxes are calculated as a percentage of the cost of lodging and added to the bill. However, this can get tricky, as not every charge is subject to lodging taxes. Charges such as fees for cleaning, extra guests, pets, insurance, or deposits may also be included in the bill — but aren’t taxed the same way lodging costs are taxed.

To make sure you’re charging and collecting the right amount of lodging tax, you need to make sure you’re calculating tax only on charges that are subject to tax — and not on charges that aren’t taxable. 

Regulations governing taxable charges can vary widely, so it’s important to know your local laws. Typically, mandatory charges, including the room rate and required cleaning fees, are subject to lodging tax. Fees that don’t necessarily apply to all renters, such as pet fees or additional vehicle parking fees, are often not taxable. But it all depends on the specific regulations in your area.

For example, in Sarasota County, Florida, “Tourist tax is to be paid on the rent and other fees included in the rent such as: accidental damage insurance, cleaning fees, roll away bed fees, pet fees, and utility fees.”

On the other hand, refundable fees often are not subject to lodging taxes. In , for instance, security deposits aren’t taxable because they’re refundable.

Keep in mind that taxability can be significantly different for services or amenities provided during a stay, such as room service or pay-per-view movies.

In Washington State, for example, “Additional charges to guests that are directly related to the room rental are taxed in the same manner as the room. Examples of such charges include, but are not limited: to pet fees, smoking fees, cleaning fees, damage or damage waiver fees, early and late departure fees, attrition fees.” However, “Additional amounts charged for telephone services, parking, laundry, and the use of meeting or banquet rooms are not subject to lodging taxes.”

Meanwhile, in Scottsdale, Arizona, STR operators must pay Privilege & Use Tax as well as local transient tax on gross income from charges for lodging. This can include no-show revenue, cancellation revenue, and resort fees. “‘Nonrefundable deposits’ for cleaning, keys, pet fees, maintenance, or for any other purpose are deemed gross income upon receipt. ‘Security deposits’ and other refundable deposits are deemed gross income at the time such deposits are forfeited.”

Promotional or complimentary items given to guests (including pens, paper, complimentary breakfast, newspapers, and postcards, but not including hygiene items like soap and shampoo) are also subject to city use tax based upon the cost of the items.

Scottsdale’s transient tax doesn’t apply to meeting rooms or banquet facilities. 

As you may realize by now, the rules regarding taxability can be complicated. To accurately calculate lodging tax, you need to research and understand which rules apply in each jurisdiction — state, county, and city — governing your property. Otherwise, you could be collecting too little tax or too much, both of which can get you in hot water with the tax authorities.

We can help. Avalara MyLodgeTax automates and simplifies short-term rental tax compliance, including registration and filing with state and local tax authorities. If you have tax questions related to your STR, drop us a line and we’ll get back to you with answers.