Complying with State, County, and Local Short-Term Rental Laws

    legal requirements for vacation rentalsWhen getting started in the vacation rental business, it's important that your second home complies with the laws and ordinances of your state, county, and municipality.

    Before you begin renting out your vacation home, make sure that you have your proverbial ducks in a row to avoid running into unpleasant surprises down the road. Here are just a few of the things that you should look into.

    Current and Proposed Zoning. Before you begin renting, check with your county and city about the zoning requirements for short-term rental properties. You should check not only on the current zoning status of the area in which your vacation home resides, but also any proposed changes that may affect your home. To investigate the status of short-term rentals in your city or county, search past newspapers for articles about your market and consider contacting other owners who are currently renting in your immediate area.

    Homeowners Association Rules. In addition to your local municipalities, your homeowners association may also have rules regarding vacation rentals within your complex or subdivision. Typically these rules are found in your CC&Rs (Covenants, Conditions & restrictions).

    Business Licenses and Permits. Many areas require vacation rental owners to apply for a business license or permit to rent homes on a short-term basis. These applications are often found online. Again, consult your city or county for more information.

    Safety Requirements. In some markets, vacation rental homes have to follow the same basic safety requirements as long-term rentals (sprinkler systems, fire extinguishers, deadbolt locks, etc.) and may also be required to complete safety inspections.

    Local Health Code Regulations
    . Some areas also have specific rules and regulations around health codes. The three most common areas of regulation involve linen sanitation, well water testing, and pool and spa maintenance.

    Sales Tax. Many states in the U.S. (and Canadian provinces) require you to collect and remit sales tax. The sales tax is paid by your rental guests in addition to your rental rates. You are simply the middleman who collects the monies and then hands them over to the state at a fixed interval. Sales tax in Canada may look different than in the U.S. because certain Canadian provinces combine it with a goods and service tax and call it a Harmonized Sales Tax, or HST.

    Taxable Fees. A taxable fee is subject to sales tax. Most fees associated with renting, such as pet fees, cleaning fees, etc., are taxable. If you are charging sales tax on these fees, service providers should not charge you sales tax on the same fees. If they do, the service gets taxed twice. So, if your guests pay a cleaning fee plus sales tax, your housekeeper should not charge you sales tax for her services. Refundable fees, on the other hand, are not taxable. This means charges like security and pet deposits should remain separate from the rental rate.
    *Last Updated April 25, 2018

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