This contains information for property owners who rent out the following places on a short-term basis (less than 30 consecutive days) for overnight accommodations:
- time shares
- camping sites
- RV sites
These owners need to register with the Department of Revenue (DOR). This is because they are required to collect and pay retail sales tax and applicable lodging taxes on the rental charges. They also owe the state business and occupation (B&O) tax, but could qualify for the small business B&O tax credit.
Engaging in business
The Department of Revenue will assume that a property owner is engaged in a taxable business activity when they do any of the following:
- Advertise the availability of their property for overnight accommodations through online marketplaces, newspapers, or other publications.
- Hire a property manager to handle the rental of the property.
- Engage in short-term rentals three or more times in a year. (Rental for 30 continuous days or more is not a taxable business activity and is not counted in determining the threshold for collecting and reporting taxes.)
Online marketplaces and taxes
Many property owners are now using online marketplaces to rent out their property. At least one of these marketplaces has entered into an agreement with DOR to collect and pay taxes due on short-term rentals on the property owner's behalf. When an online marketplace collects taxes on the property owner's behalf, the property owner must report the gross rental income under both Retailing B&O and Retail Sales Tax classifications. The owner is entitled to take under the retail sales tax classification a "99-other" deduction stating "sales tax remitted by agent." See Airbnb to collect and send taxes on behalf of hosts.
Collecting taxes from guests
Both the state and local sales tax rate must be collected from guests at the time they are billed for the rental. The state rate is 6.5 percent, and the local rate depends upon where the rental property is located. Local sales tax rates range from 0.5 to 3.9 percent (at the time of this update).
In addition to the regular sales tax, the Special Hotel/Motel Tax may apply at rates from 1.0 to 5.0 percent in certain areas. Other lodging taxes may apply such as the Convention and Trade Center Tax and the Tourism Promotion Area Charges. See our Lodging Information and Rate Changes publication for current tax rates.
Generally, if the property owner hires a property manager to collect the rents from the guests, the property manager would be required to collect and pay retail sales tax and any applicable lodging taxes on any rents collected by the property manager for short-term rentals. However, this does not relieve the property owner from personal liability for the full payment of these taxes if the property manager does not pay or underpays the taxes to DOR.
One non-itemized charge or separately itemized charges - For sales tax purposes, when lodging accommodations are sold in a package deal that includes prepared meals, and/or guided hunting or fishing, it doesn't matter whether the deal is for one non-itemized price or if the charges for the prepared meals and the lodging are separately stated. Sales tax applies on the total of the charges. Lodging taxes would not apply on the $500 charge. The seller is also subject to retailing B&O tax on the gross income.
Example 1 - Jerry's Fishing Excursions offers a package deal that includes overnight lodging accommodations, and two prepared meals per day and two days of guided fishing for one non-itemized charge of $500.
In this case, Jerry's must collect sales tax on the $500 charge and would owe B&O tax on the same amount under the retailing classification. Lodging taxes would not apply under these circumstances.
Example 2 - The story is the same, except that the charges are separately itemized for the purchaser.
In this case, sales tax would be due on all of the itemized charges since each of these charges are individually subject to sales tax.
The separate charge for lodging would also be subject to any local lodging tax/fees that apply to that location. See the Lodging Industry Guide for additional information.
However, if there are separately itemized charges for distinct products or services that are not subject to sales tax, then sales tax does not apply to the itemized charges for those nontaxable products or services.
Property owner's business and occupation (B&O) tax responsibility
Property owners are responsible for paying Retailing B&O tax even where they have an online marketplace or a property manager who collects and pays the sales and lodging taxes due on the rentals.
However, they may qualify for the Small Business B&O Tax Credit, depending on the rental income amount. The credit is automatically computed when they E-file.
How to register with DOR
Property owners can register one of two ways:
- Go to our website, bls.dor.wa.gov, and click on "Get a Washington State business license."
- Call us at 1-800-647-7706 to request an application. Complete and send to the address noted on the application.
Once registered, property owners will receive a business license and a Unified Business Identifier (UBI). This UBI number is a unique number assigned to you, and it is the "registration number" you use to report to DOR.
Electronic filing - Reporting the fast and easy way
File and pay your returns electronically using E-file. This is the fastest and easiest way to report. We also offer a variety of electronic payment methods. To learn more:
- Visit our web site at dor.wa.gov
- Click on "File my taxes online"
- Click "Learn about E-file benefits"
- Watch the video.
If you have questions, call our tax specialists at 1-800-647-7706.
Examples of reporting taxes due on lodging by location
(Does not include taxes currently imposed on transient rental facilities with multiple units):
|City||Retail Sales Tax||Special Hotel/Motel Tax||Calculation example*|
|Spokane||0.088||None if fewer than 40 rooms||$52.28 ($600 x 0.088)|
|Seattle||0.101||None||$60.60 ($600 x 0.101)|
|Leavenworth||0.084||0.03||$68.40 ($600 x 0.114)|
|Vancouver||0.084||0.02||$62.40 ($600 x 0.104)|
|Ocean Shores||0.085||0.03||$69.00 ($600 x 0.115)|
* The calculation examples reflect taxes due assuming a single unit rented for $600. The tax rates reflect rates in effect as of the date of publication, and are subject to change.
Casual property rental - Taxability example
The following example represents a property owner who has rented his property but has not advertised the availability of his property or hired a property manager.
|Rental Scenario||Tax Obligation|
John bought a cabin as a retirement home on San Juan Island. He considered renting the cabin when he would not be using it. John had no idea how often he might rent it, but by word of mouth, he rented it out once within the first calendar year for 10 days.
John is not required to register with DOR, or to collect sales tax and other lodging tax because he only entered into one rental agreement during the first year.
John rented the home five times with five separate rental agreements:
John is not required to register with DOR, or collect sales tax/lodging taxes. Only the 2 transient rentals (less than 30 days) are counted in determining the taxable threshold.
John rented the house four times, each for a period of less than 30 days.
John needs to register at the time he rents out his house for the third rental period during this year. John must collect tax on both the third and fourth rental periods, and pay the collected taxes to DOR.
John rents out his house only once for a period of 29 days.
The very first transient rental is subject to sales tax/ lodging taxes because John exceeded the taxable threshold in year three. Also, for all years after this year, John must collect taxes on all transient rentals.