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 270 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 guide you to California’s transient occupancy tax, what it is, how it works, and what you need to know as a host.
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!
What is the Transient Occupancy Tax?
The Transient Occupancy Tax (TOT) is a tax that California vacation rental hosts must charge their guests. The proceeds from the tax fund local public services such as police, fire, and parks and recreation.
Hosts must register with their city or county to collect the tax. The tax rate varies depending on the rental’s location but is typically between 10% and 14%.
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, your guests 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, you’ll need to register with your city or county 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.
How to Collect the Transient Occupancy Tax
After you register to collect the tax, you’ll need to start charging your guests the appropriate amount. You can do this by including the tax in the nightly rate that you advertise or by adding it 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 that your guests are not surprised.
When it comes time to file your taxes, you must include the total amount of TOT you collected from your guests. You can then deduct any expenses you incurred to collect the tax, such as credit card processing fees.
What Happens if You Don’t Collect the Transient Occupancy Tax?
You could be subject to penalties and interest if you don’t collect the Transient Occupancy Tax. 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 10.5%. 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 10-12%. 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 6-8%.
Note: These rates are subject to change. Check with your local government for the most up-to-date TOT information.
Final Thoughts
As you can see, the process for collecting the Transient Occupancy Tax is fairly straightforward and important, 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!
