Taxing Minnesota vacation rentals
- Oct 5, 2016 | Gail Cole
In Minnesota, state, local, and applicable special sales and use taxes apply to short-term lodging. Depending on the location, city lodging tax may also apply.
Like St. Paul, many cities throughout Minnesota are working to regulate the vacation rental business that is blossoming thanks to websites like Airbnb and VRBO. Some, like Duluth, have issued temporary moratoriums on permits while sorting out the issue. Others, like Burnsville, have “all but banned the business, saying local zoning ordinances prohibit it.” In the end, most will allow these short-term rentals provided they’re regulated — and taxed — like other short-term lodging (Star Tribune).
Short-term lodging is defined as stays of less than 30 days. Stays of 30 days or more are taxable when there is no enforceable written lease agreement requiring the customer to provide prior written notice of their intention to vacate. Lodging facilities include, but are not limited to: bed and breakfasts, campgrounds, hotels and motels, rooming houses, and vacation home rentals.
Vacation home websites such as Airbnb are required to collect and remit all applicable sales and lodging taxes on behalf of their Minnesota hosts. Individuals and businesses that don’t use such websites are responsible for registering with the state and collecting and remitting tax themselves. However, when an individual rents a room or home once, “in an isolated incident,” tax does not apply to the transaction.
Services
In addition to the lodging itself, many goods and services sold by lodging facilities are subject to tax. These include, but are not limited to, food or liquor from mini bars and refrigerators, laundry, parking, pay-per-view movies, and telephone access charges.
Since consumers don’t pay tax on complimentary items and services, such as breakfast and shampoo, the lodging provider must pay sales or use tax on inputs purchased for these services.
Additional information is available from the Minnesota Department of Revenue: Hotels and Lodging Facilities and Vacation Home Rentals.
Avalara Lodging’s end-to-end occupancy tax solutions allow lodging providers to increase compliance, reduce audit risk, and save time. Learn more.
photo credit: OuiShare Summit 2012 via photopin (license)
