Many Vermonters and those living outside Vermont who own property in the state are renting their spare rooms or other types of lodging to visitors. In many cases, the rent charged to the lodger is subject to the Vermont meals and rooms tax and should be collected and remitted to the Vermont Department of Taxes.
Should You Collect the Meals and Rooms Tax?
You may view your venture as small scale compared to a larger bed and breakfast or inn. However, Vermont tax law requires that you collect and remit tax, just like any other business operating in Vermont. Vermont law states that sleeping accommodations offered to the public for a consideration on premises operated by a private person, entity, institution, or organization are subject to the Vermont Meals and Rooms Tax if those rentals total fifteen (15) or more days in any one calendar year. Please note: If you rent your room or other type of lodging to the same person for thirty (30) or more consecutive days, the person is then considered to be a permanent resident, and different rules apply. The following is a noninclusive list of types of lodging rented or owned by the host which fall under the provisions of the law:
A house or room(s) in a house
Cabin, cottage, condominium, ski lodge
Barn, bunkhouse, tree house, camper, tent
You are personally responsible for collecting and remitting the tax to the Department of Taxes. If your rental falls within the provisions of the law, then you must charge your guests the 9% Vermont meals and rooms tax. In addition, if you are providing meals to your guests and billing them separately, those meals are also subject to tax. One exception to you collecting and remitting the tax is if Airbnb is doing so on your behalf.
Local Option Tax Also May Apply
In addition to the state-imposed business taxes, you may be required to collect and remit a 1% local option tax imposed by some Vermont municipalities. A municipality may choose to levy a local option tax on 1) meals and alcohol; 2) rooms; and/or 3) any items subject to sales tax.
Businesses are responsible for collecting and remitting local option taxes along with state business taxes. Local option tax is destination-based, meaning tax applies based on where the buyer takes possession of the taxable item. Please note that you should always calculate the local option tax as 1% of the taxable (net) sales for each town. for collecting and remitting local option taxes along with state business taxes. If you are subject to local option tax and have not been collecting and remitting it, you may have a tax liability. Find out which municipalities levy local option tax or lookup towns by zip code.
If you sell merchandise to your guests, such as your homemade candles or soap, you must charge the 6% Vermont sales tax on these items. Also, if you purchase items for your business and no sales tax is charged, such as purchases made online or in a state that does not impose sales tax, you must remit the applicable 6% Vermont use tax.
Are Tips Taxable?
Generally, tips are not taxable, but there are exceptions. Tips in excess of 20% must be reported as taxable, even if fully distributed to service employees. If any portion of the tip is retained by the operator, rather than by service employees, the portion retained becomes a part of the charge to the customer and is thus subject to tax. For meals and rooms tax purposes, business owners and operators are not service employees, even when they perform functions typically performed by service employees.
Vermont Business Tax Account and License
Businesses who do not solely use Airbnb to rent their room must register for a Vermont Business Tax Account and license prior to collecting the tax. Registration is free. All businesses must display their licenses for customers at each location as authorization to collect tax on behalf of the State of Vermont. Register online for a business tax account at myVTax or learn more about owning and operating a business in Vermont.
If you are required to register for a Vermont Business Tax Account, you must post your meals and rooms tax account number on any advertisements for the short-term rental. If you use Airbnb to rent your room, Airbnb will post its tax account number on all advertisements it does on your behalf. However, if you rent through other means, such as another website, advertise on social media, or in your local grocery store, you must maintain a meals and rooms tax account and post that number on any advertisements for the short-term rental.
If Airbnb is the only method you use to rent, you do not need to establish a meals and rooms account with Vermont because Airbnb will collect and remit the meals and rooms tax on your behalf. However, if you rent on Airbnb or use another site or another means to advertise your rental, such as social media, Chamber of Commerce, or in your local grocery store, you must maintain a meals and rooms account to remit tax you collect for non-Airbnb short-term rentals.
Internet Platform reporting
Vermont law requires informational reporting by persons providing an internet platform for the short-term rental of property for occupancy. Providing a platform for any number of short-term rentals of properties in Vermont in a given year subjects a person to these requirements. Download the reporting template.
Maintain Good Records
We highly recommend that you maintain good records for your business, including dates of rental, names of tenants, the dollar amount charged for the rental, and tax charged and collected.
Voluntary Collection Agreement
If Airbnb is not your sole means for rental, you are personally responsible for collecting and remitting meals and rooms tax. If you are subject to tax and have not been collecting and remitting it, you may be responsible for up to seven years of tax, interest, and penalty. Coming forward voluntarily through the Department’s Voluntary Disclosure Program may reduce your exposure to three years of tax and interest.
Frequently Asked Questions
When did Airbnb start collecting the tax in Vermont?
Beginning on Oct. 1, 2016, Airbnb began collecting and remitting the meals and rooms tax and local option tax on behalf of their hosts. Beginning January 1, 2017, Airbnb began collecting and remitting the Burlington city gross receipts tax.
What if I rent on Airbnb and have been collecting and remitting the tax on my own?
If you have registered for a meals and rooms tax account and are renting only on Airbnb, please contact the Department to cancel your account. You no longer need to collect and remit meals and rooms tax since Airbnb will be handling that on your behalf.
What if I rent on Airbnb and have not been collecting and remitting the meals and rooms tax?
The Department of Taxes is not currently pursuing meals and rooms tax from Airbnb hosts for meals and rooms tax that was not collected before Airbnb agreed to collect tax on behalf of its hosts.
You should make sure that all rental income is included on your income tax return.
What if I rent on Airbnb and another site?
You will need to collect and remit the meals and rooms tax on the rentals handled from Airbnb. You need to maintain and meals and rooms tax account, so you can still collect the tax that is owed on the other rentals. You do not need to report the amount of your transactions from Airbnb on your meals and rooms tax return.