Written by: Matt Church, EA and Rhonda Hampton, CPA
On Friday, October 30, the Tennessee Department of Revenue issued Notice #20-20 with information pertaining to short-term rental unit marketplaces. These marketplaces are defined as a business that provides a platform through which a third party offers to rent a short-term rental unit, such as AirBnB or VRBO. Short-term rental units are defined in Tennessee as a residential dwelling that is rented for less than 30 continuous days. It includes, but is not limited to, a cabin, house, condominium, or apartment.
Effective January 1st, 2021, short-term rental unit marketplaces will be required to collect and remit local occupancy taxes to the Department of Revenue including:
- The Tourist Accommodation Tax (Title 7, Chapter 4, Parts 1 and 2)
- The Hotel Occupancy Tax (Title 67, Chapter 4, Part 14)
- Any privilege tax imposed by private act on the occupancy of a hotel, motel, or similar establishment
Only short-term rental unit marketplaces (such as VRBO or AirBnB) should remit the local occupancy tax to the department. This notice does not apply to hotels or bed and breakfast establishments, which should continue remitting occupancy tax to the appropriate local government. Short-term rental unit marketplaces will remit the taxes in the same manner as they remit sales tax.
The impact of this notice will primarily affect the marketplaces and the governmental entity to whom they remit these occupancy taxes. Prior to the effective date, the most common situation was for them to remit the local occupancy taxes directly to the appropriate local government. Beginning January 1st, 2021, they will now file and remit these taxes online through TNTAP and to the Tennessee Department of Revenue.
Taxpayers who own short-term rental units but do not use a marketplace to source renters are not required to remit local occupancy tax to the Department of Revenue, but would still be liable to remit to the local city, county or municipality where the unit is located. For those that already remit local occupancy taxes to a city, county and/or municipality, they will be largely unaffected by this notice.
For more information, please contact Rhonda Hampton at 423.756.7771.