Lodging tax implications for short-term vs. long-term rentals

For most short-term rental operators, lodging tax compliance is part of doing business. Lodging taxes are levied on accommodations that guests rent for a short period of time, such as hotels, motels, and — in most places — short-term home rentals (STRs). Lodging taxes don’t apply to accommodations that guests rent for longer terms, including houses and apartments that guests rent via a lease contract or on a month-to-month basis.

But how do you know if your rental qualifies as “short term” and is subject to lodging taxes? And what happens if you rent a short-term rental for a longer period? These situations may not come up every day for many STR operators, but it’s important to understand the lodging tax implications.

Perhaps the most crucial thing to understand about lodging taxes is that rules are different from jurisdiction to jurisdiction. The lodging tax regulations that apply the next town over may not apply to you. Not only that, but more than one jurisdiction can apply to your STR. For example, you may need to pay attention to lodging tax laws from your city, county, and state.

STRs are often understood as rentals for accommodations lasting less than a month, but the legal definition for tax purposes is different from place to place. For example:

• In Massachusetts, an STR is defined as a rental of “31 consecutive calendar days or less.”
• Florida defines an STR as “reservations of six months or less.”
• In Georgia, STRs are rentals of “up to 90 continuous days.”

A city’s definitions of “short term” may also differ from the state in which it is located. For instance, New York State applies sales taxes to “reservations of less than 90 consecutive days,” but in New York City, sales tax applies to reservations of at least 180 consecutive days.

But that’s just sales tax, which is set and administered by New York State. Local governments in New York have the power to set local occupancy taxes, with their own definitions of a taxable length of stay. In Fulton County, for instance, occupancy tax is levied on rentals of less than 30 days, and in Dutchess County, reservations of 59 nights and shorter are subject to local occupancy tax.

For many STR properties, most guest stays remain well within the “short-term” threshold where occupancy tax applies. Or guests book a stay beyond the threshold, and it’s clear that no occupancy tax is due. But another scenario can arise in which the stay is initially booked as short term but is extended into long-term territory — and this brings tax implications, which depend on the jurisdiction.

For example, in Manatee County, Florida, guests who rent for periods of less than six months, have a lease for exactly six months or less, or are renting month to month must pay the local tourist tax. However, they are exempt from paying the tax starting the seventh month of residence at the same location.                                     

In Connecticut, rental contracts for a period of less than 90 days, including month-to-month contracts, are considered short-term rentals subject to state room occupancy tax — but only for the first 30 days of occupancy.

In some cases, such as in New York State, when short-term stays turn into long-term stays, the guest may be due a refund of the lodging tax charged during the short-term period.

Short-term rental lodging tax rules can be challenging to figure out — especially in unusual scenarios such as a short-term stay becoming a longer-term one. Avalara MyLodgeTax can help. MyLodgeTax makes sure you’re registered correctly with state and local tax authorities and that you’re charging the right amount of lodging tax to your guests, no matter the situation. For more on lodging tax regulations, see our state lodging tax guides. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.