Airbnb reaches tax collection deal with Tennessee Department of Revenue

Tennessee has come to an agreement with Airbnb to collect state and local sales taxes for short-term rentals on behalf of its 7,700 Tennessee hosts, effective March 1.

For short-term rental hosts using Airbnb for bookings, that means Airbnb will automatically collect and remit the 7 percent state sales tax as well as local sales taxes of 1.5 percent to 2.75 percent, depending on the local rate.

However, Airbnb will not collect city-assessed lodging taxes, except in Memphis, where it has a separate tax collection agreement. Short-term rental operators are also on their own to collect all taxes for bookings made through other vacation-rental platforms, such as VRBO and HomeAway. MyLodgeTax, a managed tax filing service, helps many Tennessee hosts simplify and manage lodging tax compliance.

Based on 2017 numbers, more than $13 million in state and local sales tax revenue is due annually from Airbnb bookings in Tennessee, according to Airbnb. However, much of that is most likely not currently being collected.

Tennessee has been an active state in regard to short-term rental laws. Nashville’s Metro Council recently passed a law phasing out short-term vacation rentals in residential neighborhoods that aren’t occupied by their owners.

According to the Coalition for Nashville Neighborhoods, there are 27 cities in Tennessee that prohibit non-owner-occupied short-term rentals in residential areas, including Belle Meade, Berry Hill, Brentwood, Collierville, Forest Hills, Gatlinburg, Germantown, Knoxville, Oak Hill, and Smyrna. Last year, Chattanooga, Knoxville, and Memphis all passed laws regulating various aspects of short-term rentals. And a current proposal in the Tennessee General Assembly would severely restrict the ability of cities to regulate short-term rentals.

Nashville is the No. 1 market for Airbnb in Tennessee, followed by Memphis.