A practical guide for short-term rental property managers
Managing short-term rentals means acting as a tax collector, whether you like it or not. Every time a guest books a stay, occupancy taxes are likely owed to one or more government authorities. As the property manager, you are responsible for making sure these funds reach the correct hands. This guide breaks down what occupancy tax is, how to figure out what you owe, and how to stay compliant across every jurisdiction you operate in.
What Is Occupancy Tax?
Occupancy tax is a tax levied on guests for the privilege of staying in short-term lodging. You collect it from the guest at the time of booking and pass it through to the government. It is not an income tax. You are simply a conduit for the payment.
The tax goes by different names depending on your location:
Transient Occupancy Tax (TOT): Arizona, California, Virginia
Hotel Occupancy Tax (HOT): Tennessee, Texas
Lodging Tax: Colorado, Delaware, Montana
Transaction Privilege Tax (TPT): Arizona
Regardless of the label, the mechanics are the same: collect from the guest, remit to the government, and file a return. There is no federal occupancy tax; these are imposed at the state, county, city, or special district levels.
What Gets Taxed?
Occupancy tax typically applies to more than just the nightly rate. While every jurisdiction is different, the following are generally taxable:
Nightly rental rates
Non-refundable cleaning fees
Pet fees
Service or booking fees (varies by location)
Late checkout or "no-show" fees
Note: Refundable security deposits are generally not taxable.
How Rates Work: The Layer Cake
Occupancy tax is rarely a single rate. Most properties are subject to a "layer cake" of taxes from multiple jurisdictions that stack on top of each other:
State Tax + County Tax + City Tax + Special District Taxes = Total Rate
In major markets, total combined rates often range from 10% to 18%.
Length-of-Stay Thresholds
Most jurisdictions only tax "short-term" stays. The most common threshold is 30 consecutive days. Stays longer than this are typically reclassified as long-term rentals and become exempt. However, some areas use 90-day (NY, FL) or even 180-day (HI) thresholds.
Who Is Responsible?
As a property manager, you are responsible for ensuring compliance, even when booking platforms handle part of the work.
Direct Bookings (Wander Sites)
When a guest books directly through your Wander Site, you are the Merchant of Record. You collect the tax, you remit it, and you file the return. Wander collects the taxes at checkout based on the rates you have configured in your PMS, but the full tax amount is paid out to you. You must set these funds aside for tax payments.
Platform Bookings (Airbnb, Vrbo)
Platforms collect and remit taxes only where they have formal agreements.
Partial Coverage: A platform might collect state tax but not city tax (e.g., in Austin, TX, platforms handle the 6% state tax, but hosts must manually remit the 11% city tax).
No Registration: Platforms do not register your property or file your specific returns. You may still need to file a "zero-activity" return even if the platform handled the money.
How to Register
You must register with every applicable taxing authority—typically before accepting your first booking.
Identify Authorities: Determine all state, county, and city bodies that apply to your address.
Apply for Licenses: This may include a Business License, a Lodging Tax License, or a Sales Tax License.
Display Your Number: Many cities require you to post your registration or permit number on your public listings to avoid fines.
Filing and Remittance Best Practices
1. Know Your Frequency
Depending on your volume, you will be assigned a Monthly, Quarterly, or Annual filing frequency.
Pro Tip: File even if you had zero bookings. "Zero returns" are often required to avoid late-filing penalties.
2. Separate Your Funds
Treat tax collections as liabilities, not revenue. Move tax funds into a separate bank account or sub-account immediately so you never accidentally spend money that belongs to the government.
3. Reconcile Monthly
At the end of every month, cross-reference your total bookings against:
Tax collected per booking.
Platform-collected tax vs. self-collected tax.
Amounts owed vs. amounts ready to be filed.
4. Keep Meticulous Records
Maintain records for at least 7 years. This should include guest names, dates of stay, nightly rates, and a breakout of every tax collected by jurisdiction.
Penalties for Non-Compliance
Tax authorities take occupancy tax seriously. Penalties for failing to register or remit can include:
Financial Fines: Late fees often range from 5% to 10% per month, plus interest.
Operational Bans: Some cities will revoke your STR permit or coordinate with platforms to have your listing removed if you are found to be non-compliant.
Audit Exposure: Unpaid taxes can lead to audits covering multiple years of back-pay.
The Bottom Line
Occupancy tax compliance is non-negotiable. While Wander Sites and your PMS help calculate these costs for your guests, the ultimate responsibility for remittance lies with you. Register early, file on time (even with zero activity), and never assume a platform has you 100% covered.