3% surcharge added to Vermont short-term rental bills starting August 1

Starting August 1, 2024, guests of short-term rentals (STRs) in Vermont will pay a 3% surcharge on top of the cost of their accommodation. This new surcharge is in addition to the existing rooms tax (9%) and any local option tax (1%) already added to STR charges.

The change is due to a new law passed by the Vermont General Assembly in June. Surcharge funds will go to the state Education Fund.

In Vermont, an STR is defined as “a furnished house, condominium, or other dwelling room or self-contained dwelling unit rented to the transient, traveling, or vacationing public for a period of fewer than 30 consecutive days and for more than 14 days per calendar year.” This includes both entire units and single rooms if the rental is for a stay of less than 30 consecutive days. However, the 3% surcharge does not apply if the rental is in a licensed hotel or other lodging establishment.

Vermont STR operators are already legally required to register with the Vermont Department of Taxes for a Vermont Business Tax Account and license in order to collect rooms tax and local option tax. Now STR operators must collect the surcharge from guests as well.

Hosts who rent their STR through a marketplace (such as Airbnb or Vrbo) that has an agreement with the Vermont Department of Taxes to collect and remit tax are not required to obtain a Vermont Business Tax Account. However, operators must post the tax account number used by the marketplace on any online advertisements for the rental.

Local lodging taxes may also apply, depending on the STR’s location. For areas with a local lodging tax, hosts may be required to register with the local tax authority and file local occupation tax returns in addition to state registration and filing.

In Vermont, all charges for the use of the rental are taxable, including fees for cleaning, pets, rollaway beds, extra people, and forfeited deposits. Optional services are not subject to state rooms tax as long as the service charge is separately stated on the guest’s bill. If the host provides meals to guests and bills them separately, those meals are also subject to meals and rooms tax. If the host sells merchandise to guests, they must charge sales tax on those items.

As of the end of 2023, 12,000 STRs were operating in Vermont, a number that’s increased 15 times over the past 10 years, according to the Vermont League of Cities and Towns. STRs have been a hot topic in Vermont, with several local governments taking action, including Dover, Essex Junction, Greensboro, Rutland Town, St. Albans, Stowe, Wilmington, and Winooski.

In February 2024, South Burlington passed an ordinance that only permits STRs in homes where the owner resides full time (defined as at least six months and one day each year). STR operators are also required to register with the city for an annual fee and make rentals available for inspections. Existing STRs have four years to comply with the new rules. South Burlington STRs are subject to the state rooms tax, local option tax, and now the 3% surcharge. Airbnb and Vrbo collect these taxes for their listings.

In 2022, Burlington passed a law requiring STRs to register and only allowing them in the host’s primary residence. In addition to the new 3% surcharge, STRs in Burlington are subject to local short-term rental tax as well as the state meals and rooms tax. Airbnb collects the state meals and rooms tax and local short-term rental tax on behalf of Burlington hosts. Vrbo collects the state meals and rooms tax for Burlington hosts, but not the local short-term rental tax. 

Avalara MyLodgeTax can help short-term rental hosts automate lodging tax to streamline and simplify lodging tax compliance. For more on lodging taxes in Vermont, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.