Corporate housing and lodging tax — what you need to know

The perks of a new job might include a company-matched 401k, a branded backpack and wearable swag, or all-you-can-drink cold brew coffee at the office. But what about when the new job comes with a new place to live (even temporarily)? Corporate housing is on the rise, and so is corporate housing lodging tax complexity.

Corporate housing, including furnished apartments, temporary housing, serviced apartments, executive suites, and executive rentals is fully furnished temporary housing. Typically an apartment, these units tend to include furniture, housewares, amenities, and utilities like cable, internet, and electric, usually at one cost to the company for 30 days or more.

In October 2021, Americans surveyed in a Pew Research poll said availability of affordable housing in their area was a major (49%) problem. Corporate housing can be part of an employee attraction and retention plan.

And while the concept of corporate housing has existed in America in some form or another since the 1800s, company housing, furnished apartments, and serviced apartments are still popular today. Salaries are determined in part by the cost of living in an area, and to avoid having employees in high cost-of-living areas or commuting to the office from more affordable neighborhoods, tech companies are increasingly taking housing into their own hands. In 2023, there was a plan to build an entire town outside of Austin, Texas for employees of The Boring Company and SpaceX; Meta is planning to build a development for employees in Menlo Park, California.

Corporate housing isn’t limited to “company towns;” however. It also includes any kind of extended stay during which time a business provides lodging for an employee: a film crew shooting on location for a few months, a traveling doctor or nurse, or an employee relocating from out of state.

Tax regulations governing corporate housing and serviced apartments can be complex and vary significantly across jurisdictions. Navigating these regulations requires a thorough understanding of local tax laws, including transient occupancy taxes, sales taxes, and corporate income taxes.

Lodging tax (also called hotel tax) is charged to travelers when they rent accommodations in a hotel, tourist home or house, motel, serviced apartment, or other lodging, unless the stay is for a period of 30 days or more (depending on the state). It’s also called occupancy tax, tourist tax, transient occupancy tax, room tax, bed tax, or resort tax. 

If your company houses employees near your headquarters in Michigan (6% tax rate statewide) for training, and has sales teams staying in Chicago (6% state hotel tax, plus a 4.5% Hotel Accommodations Tax and a 17.39% City Tax for the city of Chicago), St. Louis (4.225% state tax rate, a 3.75% Convention and Tourism Tax, and a 3.5% Convention and Sports Tax), and Cincinnati (5.75% state tax rate and a 7.5% lodging tax for Hamilton County) for a few weeks at a time, it’s key to know all the local rules and regulations that affect your tax obligations in those jurisdictions.

And if you’re a property manager that manages those furnished apartments, it’s important to know how tax differs between those states. A good place to start is our 5 steps to managing lodging tax compliance guide.

There are likely more than 4,000 local accommodations taxes in the United States, and since lodging taxes vary by location, determining rates and exemptions can be burdensome. And as more companies turn to corporate housing for their employees, they have that many more opportunities to get tax wrong.

Governments at various levels are increasingly scrutinizing corporate housing arrangements to ensure compliance with lodging tax laws. This heightened attention has led to more stringent enforcement measures and penalties for noncompliance.

The corporate housing trend doesn’t look like it’s slowing down, and as companies look for ways to attract talent, it’s likely to become more prevalent.

If your company is considering investing in corporate housing, or has already made it part of your business plan, it’s critical to stay on top of compliance and in front of government regulations regarding lodging tax. The best way to do this is with tools to keep you up to date on lodging tax rates and rules across the country. Avalara for Hospitality helps businesses succeed by researching tax rates; consolidating data; and preparing, filing, and remitting hospitality-related taxes — giving you peace of mind.