Everything You Need To Know: A Guide to Vermont’s New Short Term Rental Tax Law (In Plain English)
What’s that? You’re not a tax lawyer? All this talk of short term rental tax increases has your head spinning? No worries! Look no further than our Guide To Vermont’s New Short Term Rental Tax Law: In Plain English. It’s a guide that makes a dry subject slightly more palatable… and significantly more understandable. We’ll also tell you how to save big bucks $$...So here it goes…
What’s this tax all about?
The Vermont legislature decided that to make up some money for the huge school budget deficit they’d like to charge rents collected from short term rentals an additional 3% surcharge. This 3% surcharge is in addition to the current 9% rooms tax and any 1% local tax option already collected by short term rental owners. This brings the total tax rate on short term rentals to 12% or 13% respectively. Phew!
When does this tax begin?
The 3% surcharge is applicable to rents collects from short term rental bookings on or after August 1st, 2024. Yes that’s this August… like right around the corner August…
Who does this tax apply to?
The tax is applicable only to short term rental operators. Just think how much more money the state could have collected if they increased the rate for all meals and rooms taxpayers? Anyway, the state defines a short term rental as a dwelling unit rented for consecutive periods of less than 30 days for more than 14 days per year. So, if that’s you, you’ll need to pay up after August 1st. The tax does not apply to licensed lodging establishments like hotels, motels, inns, and bed and breakfasts.
What if I booked my short term rental before August 1st but the actual stay is after August 1st?
Straight from the words of the Vermont tax department “The August 1 effective date applies to the collection of rents. Operators collecting rents for short-term rentals on or after August 1, 2024, must collect the 3% surcharge. This is true even for reservations made prior to August 1, 2024 without payment. Accordingly, rents collected before August 1, 2024, are not subject to the 3% surcharge even when the stay occurs on or after August 1.”
Pro Tip: This means if you collect payment in full prior to August 1st for a stay after the August 1st date, you will not be required to pay the additional 3% surcharge. I would highly encourage you to reach out to your renters to collect payment prior to August 1st.
For those that use a STR booking platform that collects and remits tax on your behalf like Airbnb or VRBO, I’d recommend reaching out and explaining this situation to them.
How will this tax change be reflected when I file my Meals and Rooms tax?
- Monthly Filers - Your July meals and rooms tax return will have the 9% rate. Your August meals and rooms tax return will have a 12% rate.
- Quarterly Filers - Third quarter 2024 filing (July, August, September) will be broken down by month where you will be able to specify your rents collected per month. This was verified by communication with the VT business tax department.
In both of these circumstances it is important that you collect final and full payment during the month of July for your bookings received prior to August 1st for stays after August 1st. That way you will not be subject to the 3% tax surcharge.
What if I do not file my taxes electronically?
According to the Vermont Tax department:
The Commissioner of Taxes has required that all businesses filing the new short-term rental surcharge on Form MRT- 441, Meals and Rooms Tax Return, must file their returns and pay any tax due electronically beginning with the August 2024 return, which is to be filed by September 25. (VT Tax Dept.)
This means that those of you that file by mail with the paper tax form will not be able to file by mail after the July tax filing period.
Phew!… that wasn’t so bad was it? Did we inspire you to dabble in tax law during your spare time?
Well, that’s essentially the meat and potatoes of Vermont’s Newfangled Short Term Rental Tax Law. Here at Stayclass we strive to be an advocate for all short term rental owners, and most importantly, we’re always here to help. So, if you have any questions feel free to reach out anytime.
I hope this guide made your experience understanding Vermont’s new short term rental tax law less taxing. 😉
Cheers!