New California law requires short-term rental listings to show complete price before taxes

Short-term rental (STR) and hotel listings in California are now required to reveal all mandatory costs up front, according to a new state law that went into effect July 1, 2024. That means all fees that must be paid as part of the booking — including cleaning fees, host fees, service fees, and more — must be visible to prospective guests at first glance in advertisements and listings. Taxes are not included in the law and can be added when the guest is ready to book.

Short-term rental marketplaces are complying with the new requirements in the way they display search results. Both Airbnb and Vrbo’s default display shows two prices: a nightly rate in bold, and “total before taxes” rate in regular font. For California listings on these marketplaces, the bolded nightly rate includes fees. Airbnb searchers in any state also have a toggle that offers them the option to display only the total before taxes for all search results. When users begin searches for California listings, both marketplaces inform users that the prices for California properties include all fees.

According to Pamela Knudsen, Avalara Senior Director, Tax Compliance Services, transparency requirements could make STR operators rethink some of the fees they charge guests.

“It’s really going to depend,” Knudsen says, “on how they want to look compared to the other people that are listing on that same platform and in that same area.”

Other states — and the federal government — could follow California’s example. Last year, President Biden announced an initiative to curb junk fees. And Minnesota recently passed its own price transparency law that will go into effect in 2025.

Transparency laws in California and Minnesota require fees to be disclosed before taxes. But did you know that local lodging taxes are often assessed on these fees? Commonly, any charge a guest must pay for lodging is taxed along with the basic price for accommodation. However, these rules vary widely from place to place, so fees that are taxable in one tax jurisdiction may not apply in another. You need to know the rules for lodging taxes that apply to your property — and for lodging taxes that may apply to more than one jurisdiction, such as for city and state.

The rules regarding taxability — including which fees are taxable — can be complicated and obscure. 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.