New 3% tax on short-term rentals begins, Aug. 1

Staff report

Starting on Aug. 1, 2024, a 3% tax on short-term rental bookings in Vermont will be added. This tax applies to all short-term rentals and is in addition to the state’s existing 9% rooms and meals tax and any 1% local tax option, meaning hosts and guests will now see a combined tax rate of 12%-13% on their bookings.

Airbnb and VRBO, the two largest booking platforms, will now include these taxes automatically.

The new 3% tax revenue was enacted by the Vermont Legislature this past session as part of a larger effort to reduce the statewide property tax increase, keeping it to an average of 13.8%.

The state defines a short term rental as a dwelling unit rented for consecutive periods of less than 30 days for more than 14 days per year. The tax does not apply to licensed lodging establishments (hotels, motels, inns, and bed and breakfasts).

For those with bookings through Aug. 1, the Vermont tax department states: “The Aug. 1 effective date applies to the collection of rents. Operators collecting rents for short-term rentals on or after Aug. 1, 2024, must collect the 3% surcharge. This is true even for reservations made prior to Aug. 1, 2024 without payment. Accordingly, rents collected before Aug. 1, 2024, are not subject to the 3% surcharge even when the stay occurs on or after Aug. 1.”

Stay Class, a direct booking vacation rental platform for rentals in Vermont, clarified that statement with a “pro tip,” explaining, “This means if you collect payment in full prior to Aug. 1 for a stay after the Aug. 1 date, you will not be required to pay the additional 3% surcharge. I would highly encourage you to reach out to your renters to collect payment prior to Aug. 1.”

This tax change will be reflected as landlords file any Meals and Rooms taxes. For monthly filers, the July meals and rooms tax return will have the 9% rate, while the August meals and rooms tax return will have a 12% or 13% rate, depending on whether the rental is in a town that assesses additional 1% option tax. For quarterly filers, the third quarter 2024 filing (July, August, September) will be broken down by month with specific rents collected in each listed.

For more information visit: Tinyurl.com/STRtax.