Understanding your tax obligations is crucial if you own a short-term rental (STR) in Texas. Many new hosts assume that platforms like Airbnb or VRBO handle all tax responsibilities, but that’s not always the case. While some taxes may be collected and remitted on your behalf, other taxes are totally your responsibility as the property owner. Failing to comply with these requirements can result in penalties, back taxes, or even audits.
This guide provides a comprehensive breakdown of Texas STR taxes and fees, including:
- The types of taxes you need to collect and remit
- How tax rates vary by location
- Best practices for compliance to avoid penalties
- Common mistakes and how to prevent them
What Are Short-Term Rental Taxes?
Short-term rental (STR) taxes function similarly to hotel taxes. In Texas, STRs are considered temporary lodging accommodations, which means they are subject to hotel occupancy taxes (HOT). These taxes apply whether you’re renting out an entire home, a single room, or even a guesthouse on your property.
Texas imposes STR taxes at both the state and local levels. As an STR operator, you’re responsible for collecting these taxes from guests and remitting them to the appropriate authorities.
State vs. Local Taxes: What You Need to Know
STR owners in Texas must account for two main types of lodging taxes:
- Texas State Hotel Occupancy Tax (HOT) – 6%
- This tax applies to all short-term rentals statewide.
- It must be collected from guests and paid to the Texas Comptroller of Public Accounts.
- The state defines a short-term rental as any stay less than 30 days.
- Local Hotel Occupancy Taxes – Varies by City & County
- Many cities and counties impose their own HOT, typically ranging from 7% to 9%.
- These taxes are separate from the state HOT and must be remitted to local tax offices.
- Some jurisdictions also impose additional tourism fees or special district taxes.
Key Tax Collection Requirements for STRs in Texas:
- State hotel occupancy tax applies to rentals of $15 or more per day.
- Local hotel taxes apply to rentals of $2 or more per day.
- Tax must be collected by hotel owners, operators, or managers.
- Applies to hotels, motels, bed & breakfasts, condos, apartments, and houses used for short-term stays.
Here’s a table summary of the occupancy taxes Airbnb collects and remits in various Texas jurisdictions:
Who Is Responsible for Collecting and Paying STR Taxes?
STR owners must include the tax in the total amount charged to guests and ensure it is correctly itemized. Some booking platforms, like Airbnb and VRBO, may collect and remit certain taxes on your behalf, but this doesn’t always cover all local taxes. If your platform doesn’t collect all required taxes, you must register, collect, and remit the balance yourself.
Breaking Down the Fees
Short-term rental hosts in Texas often focus on nightly rates and cleaning fees, but not all charges are treated the same when it comes to taxation. Some fees are taxable, while others may be exempt depending on how they are itemized. Understanding the taxability of various fees can help you avoid miscalculations and unexpected costs.
Here are the common fees that STR owners typically collect and whether or not they are taxable:
1. Cleaning Fees
If separately stated on the invoice, cleaning fees may not be subject to state hotel occupancy tax. However, if the cleaning fee is bundled into the total rental rate, it is considered part of the taxable amount. Some cities and counties may require taxes on cleaning fees regardless of how they are listed.
2. Service Fees Charged by Booking Platforms
Platforms like Airbnb and Vrbo charge service fees to guests and hosts. These fees are typically not taxable for STR owners since they are collected directly by the platform. However, guests often assume they are part of the rental price, leading to confusion when reviewing tax breakdowns.
3. Security Deposits & Refunds
Refundable security deposits are not taxable, as long as they are returned in full to the guest. If a portion of the deposit is withheld due to damages, the retained amount may become taxable depending on local tax regulations.
How to Collect and Remit Taxes
Once you understand which taxes apply to your short-term rental, the next step is ensuring they are collected properly and paid on time. Failure to do so can lead to penalties, interest, and unnecessary financial headaches.
Here’s a guide on how to collect and remit STR-related taxes in Texas:
1. Register for a Texas Tax Permit
Before you can start collecting taxes from guests, you may need to register with the Texas Comptroller of Public Accounts for a Texas Hotel Occupancy Tax Permit.
- Who needs to register? STR owners who collect state hotel occupancy taxes themselves.
- How to apply? Online via the Texas Comptroller’s website or by submitting a paper application.
- Is there a fee? No, but failure to register before collecting taxes could lead to fines.
2. Know When and How to File Taxes
Your filing frequency depends on your total rental income.
- Monthly Filing: Required if you collect more than $500 in taxes per month.
- Quarterly Filing: For those collecting between $100 and $500 per month.
- Annual Filing: Allowed if you collect less than $100 per month.
Taxes must be reported and paid through the Texas Comptroller’s eSystems portal or by mail. Local jurisdictions often have separate filing requirements, so it’s essential to check with your city or county tax office.
3. Automate the Process
To streamline tax compliance, many STR owners use automation tools like:
- Airbnb/Vrbo Tax Collection: If the platform remits state and/or local taxes for you, verify which taxes are covered.
- Tax Software (e.g., Avalara MyLodgeTax, Hostfully, or Lodgify): These services can calculate, collect, and remit taxes automatically.
- Accounting Tools (e.g., QuickBooks, Xero): Helpful for tracking STR tax obligations and income.
4. Avoid These Common Tax Mistakes
- Assuming all taxes are collected by Airbnb/Vrbo – Some cities/counties require separate payments.
- Forgetting to remit taxes collected from guests – Holding onto taxes instead of paying them on time can lead to penalties.
- Incorrectly calculating local rates – Tax percentages vary by city and county, so double-check your jurisdiction’s rules.
5. Take Proactive Steps to Avoid Tax Issues
- Set calendar reminders for due dates to avoid missing payments.
- Use tax automation tools to ensure accurate collection and remittance.
- Double-check local tax rules—some jurisdictions update rates annually.
- Keep detailed records for at least four years in case of an audit.
Frequently Asked Questions (FAQs)
What happens if I miss a tax deadline?
If you fail to pay your Texas STR taxes on time, you could face penalties and interest charges:
- 1–30 days late: A 5% penalty on the unpaid tax amount.
- More than 30 days late: A 10% penalty, plus additional interest.
- Repeated non-compliance: May result in an audit or legal action.
However, Texas offers penalty waivers for first-time mistakes if you provide a reasonable explanation and pay the outstanding amount promptly.
How can I fix a mistake in my tax filing?
If you miscalculate your STR taxes or fail to collect the correct amount, here’s what to do:
- Under-collected taxes? You may need to cover the shortfall yourself to stay compliant.
- Over-collected taxes? You can either refund the guest or remit the full amount and adjust future collections accordingly.
- Filed incorrectly? You can amend your tax return using the Texas Comptroller’s eSystems portal.
What are the most common reasons STRs get audited?
While tax audits for STRs aren’t common, certain red flags could increase your risk:
- Frequent late or missed payments
- Underreporting taxable income
- Discrepancies between state and local tax filings
- Guest complaints or reports of non-compliance
If you receive an audit notice, gather all financial records, tax filings, and rental documentation. Consulting a tax professional can help you navigate the process effectively.
Conclusion
Managing Texas short-term rental taxes and fees may seem overwhelming, but this process can be done smoothly with the right approach. Stay compliant by knowing your tax obligations, collecting the correct amounts, and filing on time.
To avoid issues:
- Verify state and local tax requirements for your rental.
- Register and remit taxes properly—don’t rely solely on Airbnb or VRBO.
- Use automation tools or professionals to simplify compliance.
- Keep records to prevent audit risks.
- Work with a local tax expert or a professional property management company that is privy to the Texas tax law to ensure compliance.
By staying proactive, you can protect your profits and run a hassle-free STR business in Texas.
