what is transient occupancy tax

Throughout the U.S., there are different types of short-term rental occupancy taxes that vary by state. As you probably know, the state of California is massive – it's home to nearly 40 million people. With that population comes a ton of visitors. In fact, California welcomes over 200 million visitors each year.

If you're a short-term rental host in the Golden State, you may be wondering: what is the transient occupancy tax? This blog post will give you a complete guide to California's transient occupancy tax, what it is, how it works, and what you need to know as a host.

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What is the Transient Occupancy Tax?

The Transient Occupancy Tax (TOT) is a tax that vacation rental hosts in California are required to charge their guests. The proceeds from the tax go towards funding local public services such as police, fire, and parks & recreation.

In order to collect the tax, hosts must first register with their city or county. The tax rate varies depending on the location of the rental but is typically between 10-12%.

what is transient occupancy tax

Who is Required to Pay the Transient Occupancy Tax?

The TOT applies to all vacation rentals in California that are rented for 30 days or less. This includes apartments, homes, condos, rooms in a house, and even RVs and boats. Technically it is your guests who are paying this tax, but it is the host's responsibility to collect and report it to the state of California.

There are a few exemptions to the rule. Hotels, motels, and inns are not required to collect the tax as they are already subject to similar taxes. Additionally, rentals that are part of a timeshare program or used for agricultural purposes are also exempt.

What If You Host Long-Term Stays?

If you host stays that are longer than 30 days, you are not required to collect the Transient Occupancy Tax. However, there must be a written rental agreement between the host and the guest within 30 days that states the guest intends to stay longer than 30 days.

Note: you may still be responsible for paying other taxes, such as the Hotel Bed Tax or the General Excise Tax.

How to Register to Collect the Transient Occupancy Tax

If you're renting out your property for 30 days or less, then you'll need to register with your city or county in order to collect the TOT. The registration process is simple and can be done online.

You'll need to provide your contact information, property address, and the number of units you have available for rent. Once you're registered, you'll be given a certificate that must be prominently displayed at your rental property.

what is transient occupancy tax

How to Collect the Transient Occupancy Tax

After you've registered to collect the tax, you'll need to start charging your guests the appropriate amount. This can be done by including the tax in the nightly rate that you advertise or by adding it on as an additional fee at the time of booking.

If you choose to include the tax in your nightly rate, make sure that this is clearly stated in your listing, so there are no surprises for your guests.

When it comes time to file your taxes, you'll need to include the total amount of TOT that you collected from your guests. You can then deduct any expenses that you incurred in order to collect the tax, such as credit card processing fees.

What Happens if You Don't Collect the Transient Occupancy Tax?

If you don't collect the Transient Occupancy Tax, you could be subject to penalties and interest. Additionally, your city or county may require you to pay back taxes for any stays that were not properly taxed.

Transient Occupancy Tasks in California's Biggest Short-Term Rental Host Spots in 2022

While the TOT might seem like a headache to deal with, it's actually a relatively simple tax to collect. Let's take a look at the TOT in some of California's most popular short-term rental cities:

Los Angeles

In Los Angeles, the TOT is 14%. In Los Angeles, if you are only renting your property through Airbnb, the platform will report this tax on your behalf. However, if you are using a multi-channel distribution strategy (as you should be!), you still need to manually report this tax.

Oakland

The TOT in Oakland is 14%.

San Diego County

The TOT in San Diego is 8%. Hosts are required to register with the city and file quarterly tax returns.

San Francisco

The TOT in San Francisco is 14%. Tax returns are due monthly instead of quarterly.

Palm Springs

The TOT in Palm Springs is 11.5%. Tax returns are due monthly regardless of if your property was rented out that month or not.

Lake Tahoe

The TOT in Lake Tahoe is 10%. Hosts must register with the city and file quarterly tax returns. For certain redeveloped short-term rentals, the TOT may be up to 12%.

San Jose

The TOT in San Jose is 8%.

As you can see, the process for collecting the Transient Occupancy Tax is a fairly straightforward and important tax, no matter what city you're in. By understanding what the tax is and how to collect it, you can avoid any penalties or interest. So long as you register with the appropriate authorities and charge your guests the correct amount, you'll be in good shape.

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels. Start your free trial today! 

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