Why It Matters
TOT is a pass-through tax: the guest pays it on top of the nightly rate, and the host forwards it to the city or county. For short-term rental investors, it affects competitive pricing and booking demand — a 17% TOT means a $200 nightly rate costs the guest $234 all-in. Airbnb and Vrbo remit TOT automatically in many jurisdictions, but coverage is not universal. Always verify whether you still need to register and file separately with your local taxing authority even when the platform remits.
At a Glance
- What it is: A local/state tax on stays under 28–30 days, paid by the guest and remitted by the host or platform
- Common rates: 10%–17% depending on city and state; Nashville 17.25%, NYC 14.75%, San Francisco 14%, Austin 17%
- Who remits: Airbnb and Vrbo collect and remit automatically in 50+ states; in others, hosts register and remit directly
- Registration: Most jurisdictions require STR operators to obtain a TOT remittance number before accepting bookings
- Underwriting impact: TOT raises the guest's all-in cost, affecting demand elasticity and competitive rate-setting
TOT = Nightly Rate × TOT Rate
How It Works
TOT is a consumption tax levied on the guest, not the investor. When a guest books a short-term rental, the total amount they pay includes the nightly rate plus TOT (and often additional platform fees). The host or booking platform collects the tax at checkout and holds it in trust for the local government. Most jurisdictions define "transient" as any stay under 30 days — once a stay crosses that threshold, TOT no longer applies and the rental falls under standard residential lease rules instead.
Airbnb and Vrbo cover most major markets, but not all. As of 2024, Airbnb collects and remits TOT in 50+ U.S. states and thousands of municipalities — this shows up as a separate line item on the guest receipt, and the host receives their payout net of the tax. Vrbo operates similarly. The catch: some smaller municipalities and counties aren't covered by platform remittance. In those cases, the host must register directly with the taxing authority, obtain a lodging operator registration number, collect TOT from guests, and file monthly or quarterly returns. Even where Airbnb remits on your behalf, some jurisdictions require hosts to separately register and confirm the platform's remittance — failure to do so can trigger fines.
TOT rates vary widely and change over time. Nashville charges a combined 17.25%, Austin 17%, New York City 14.75%, Los Angeles 14%, and San Francisco 14%. Hawaii layers a Transient Accommodations Tax (TAT) on top of the General Excise Tax (GET), reaching roughly 14.96% total. Some jurisdictions also add a county layer on top of the city rate. Because municipalities regularly adjust rates to fund tourism infrastructure and general budgets, always verify the current rate with the local tax authority — don't rely on data more than 12 months old when modeling a new acquisition.
Real-World Example
Brian purchased a two-bedroom cabin near Gatlinburg, Tennessee. The county's combined TOT — state sales tax plus local lodging tax — came to 15.5%. Brian listed the cabin at $185 per night. On each booking, guests paid $185 plus $28.68 in TOT, for a total of $213.68. Because Sevier County was covered by Airbnb's remittance program, the platform collected and forwarded the tax automatically, and Brian received payouts of $185 per night (minus Airbnb's service fee). When he underwrote the deal, Brian modeled his ADR at $185 — the pre-tax rate — rather than the $213.68 gross rate. He also verified that Sevier County still required him to register as a transient lodging operator and obtain a permit number, even though Airbnb handled remittance. Skipping that step would have voided his STR operating permit.
Pros & Cons
- Guest absorbs the tax cost directly — TOT does not reduce the host's nightly revenue
- Platform remittance (Airbnb/Vrbo) eliminates manual collection and filing in most major markets
- Compliance is straightforward where remittance is automated: register once, let the platform handle the rest
- TOT-inclusive pricing is standard across the market — competitors face the same rates, leveling the playing field
- Registration requirements create a formal paper trail that supports the investor's business entity legitimacy
- Raises all-in guest cost, which can reduce booking conversion rates relative to markets with lower or no TOT
- Host is still legally liable for any remittance shortfalls if the platform makes an error or the jurisdiction isn't covered
- Registration requirements vary by jurisdiction — some require annual renewals, others monthly filings even when amounts are zero
- Rates can increase without notice, requiring model updates for properties held long-term
- Multi-property operators in multiple jurisdictions face a patchwork of different registration processes, filing deadlines, and rate schedules
Watch Out
- Platform coverage gaps: Just because Airbnb remits in your state doesn't mean it remits in your specific county or city. Verify at the county and municipal level, not just the state level.
- Separate registration obligation: Many jurisdictions require a separate STR or TOT operator registration even when the platform remits. Operating without it can result in back-taxes, penalties (often 25–50% of unpaid tax), and STR permit revocation.
- Modeling on gross ADR: Market data tools sometimes report ADR inclusive of taxes. Always confirm whether a benchmark rate is pre- or post-tax — modeling on a post-tax ADR will inflate your projected revenue.
- Rate changes mid-hold: A 2% rate increase on a $200/night cabin generating 200 nights/year is $800 in additional guest cost annually — enough to shift demand on price-sensitive markets. Stress-test underwriting with a 2–3 point rate increase scenario.
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The Takeaway
TOT is an unavoidable operating reality for every short-term rental investor. The guest pays it, but the host is responsible for ensuring it gets collected and remitted correctly. In most markets, Airbnb or Vrbo handle the mechanics — the real work is upfront: confirming platform coverage for your exact jurisdiction, registering as a lodging operator, and modeling ADR on the pre-tax nightly rate so revenue projections reflect actual investor income. Investors who treat TOT as an afterthought get surprised by registration fines, permit issues, or inflated revenue models that don't survive first-year actuals.