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. They find it is a way to make a little extra money to supplement their incomes, but in many cases, the rent charged to the lodger is subject to the Vermont Rooms and Meals Tax and should be collected and remitted to the Vermont Department of Taxes. If you are renting a room in your home or some other form of lodging to guests, you should learn your tax liabilities in Vermont.
Requirements for Advertising through Internet Platforms
Operators of short-term rentals located in Vermont who advertise on an internet platform are required to post their Vermont Meals and Rooms Tax account numbers on any advertisements. If, however, the operator uses an internet platform such as Airbnb.com, which has an agreement with the Department of Taxes to collect and remit tax on behalf of its operators, then the operator may post the meals and rooms tax account number used by the platform. When using the platform’s tax account number, there is no need to obtain a Vermont meals and rooms tax account.
For any rentals offered off of the platform, the operator must have a Vermont Meals and Rooms Tax account and post the number on any advertisements for the short-term rental.
Operators must post within the rental unit a phone number for the person responsible for the unit. In addition, the operator must post contact information for the Vermont Department of Taxes, the Department of Health, and the Department of Public Safety’s Division of Fire Safety.
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 15 or more days in any one calendar year. Note: If you rent your room or other type of lodging to the same person for 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.
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.
Local Option Tax
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 item 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.
What If You Have a Tax Liability?
You are personally responsible for collecting and remitting all taxes that apply to your business. 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. Learn more about the Voluntary Disclosure Program or call the Department’s Audit Division at (802) 828-2514 for more information.
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.
Vermont Business Tax Account and License
Businesses and nonprofits must register for a Vermont Business Tax Account and license before collecting Vermont tax. Registration is free.