Renting out part or all of a property on AirBnB is a popular source of passive income, but did you know that operating a short-term rental means you may need to register with the Washington Department of Revenue and the city where the property is located, even if you don’t own a business?
If you are renting out a room, home, condo, time share or camping/RV site without a valid Washington business license, you are most likely not in compliance.
Take the taxable business activity test
If any one of the following applies to the overnight accommodation you rent out, the WA Department of Revenue will assume you are engaged in a taxable business activity:
- You advertise through an online marketplace, newspapers or other publications
- You hire a property manager to handle the rental of your property
- You enter into short-term rental contracts (less than 30 consecutive days per consumer)
How does this impact me?
Operating a short-term rental is considered the same as running a hotel. This means long-term rental exemptions do not apply.
Short-term rental property owners are responsible for:
- Collecting and paying retail sales tax on rental charges
- Paying lodging and convention and trade center taxes, depending on your location
- Paying any Retailing Business & Operations (B&O) tax due after taking the small business Business & Operations tax credit (the credit calculates automatically when you file electronically, if applicable)
Doesn’t AirBnB collect for me?
Property owners who list exclusively through an online marketplace may already be covered by the platform.
AirBnB collects and sends the following taxes to the Washington Department of Revenue on the property owner’s behalf:
- State and local retail sales tax
- Special hotel/motel taxes
- Convention and trade center taxes
Note that AirBnB does not collect or pay your Business & Operations tax.
If you use any other platforms, you will need to double-check if taxes are being handled by the listing company. This information should be outlined in your contract.
Exemptions for Long-Term Rentals
For rentals where the guest or resident occupies the property for longer than 30 days (nontransient), certain exemptions are granted.
Property owners do not need to charge and collect tax for nontransient lodging and the income from these rentals is exempt from Business & Operations tax.
Need help with tax planning for short-term rentals?
Our team believes a tax return should be the result of strategic planning, and never a surprise. If you own and operate a short-term rental property in Washington State, we can help you stay in compliance and look for ways to lower your tax burden.
Start your journey to tax-efficiency by requesting a free consultation with our team here: online contact form.
For additional information on this topic, visit the WA Department of Revenue Personal Home Rentals page.