Attention: Remember even if you did not rent the property for a filing period, you must still file a $0 TPT return.
The transient lodging classification is comprised of businesses operating the following:
- hotel or motel, including an inn
- tourist home or house
- dude ranch
- studio or bachelor hotel
- lodging house
- rooming house
- apartment house
- public or private club
- mobile home or house trailer at a fixed location or other similar structures.
Short-Term or Vacation Rentals
Some landlords may rent their properties for less than 30 days at a time. These rentals are subject to the State Transient Lodging classification, and the Hotels classification under the Model City Tax Code. The additional tax on transient lodging under the Model City Tax Code may also apply to these rentals in that city/town.
What Rental Income is Taxable?
All income received in conjunction with the rental of the property is considered taxable income.
The bigger question that should be asked is: Is the income you are receiving refundable? If it is refundable, it isn’t going to be reported until it is no longer refundable.
Any revenue received is subject to tax unless there is an exemption for it, therefore, fees charged for items such as security deposits, cancellations fees, and housekeeping are considered taxable gross income at the time the fee is no longer refundable to the renter.
Residential rental is the rental of real property for a period of more than 30 days for residential purposes and not commercial purposes.
Online Lodging Marketplaces
A landlord may offer a rental property on an Online Lodging Marketplace (OLM) or another type of digital platform. The OLM is required to be registered with ADOR to file and pay the tax on the transactions made through their online platform. Some landlords may employ a property management company (PMC) to manage the rental of the real property. If this occurs, the PMC may file and pay any applicable tax on behalf of the landlord. However, please note, the landlord is ultimately liable for filing and paying the taxes owed.
Revenues received from an OLM must still be reported to ADOR, but if 100% of all listings are facilitated through the OLM, the property owner may deduct 100% of the income using the appropriate deduction code 775. Any direct bookings received by the owner or property tax manager is not deducted and the owner/property manager is responsible for the tax.
Form 5018 - The operator/owner that receives short-term lodging revenue through an OLM will obtain a certificate, Form 5018, from the OLM stating they are collecting and remitting the tax as outlined in the Arizona Revised Statutes. This form is to be completed and signed by the OLM or his designee and should be retained by the OLM and the operator/owner to provide evidence of the exempt transaction.
Property Management Company
A property management company (PMC) is a business that acts on behalf of the property owner regarding rentals, including overseeing/managing the property, filing returns, and remitting applicable rental tax.
Among other things, the PMC is responsible for electronically filing and paying taxes on behalf of the property owner. Please note, if an owner engages multiple PMCs to manage various properties, each property would need to be licensed separately. There can't be multiple returns submitted within the same period. The second return will either process as informational or amended and will cause problems with the account.
Business code 025 (transient lodging) is used to report lodging bookings for less than 30 days for the state/county.
Business code 044 (hotel/motel) is used to report hotel/motel type of transactions for the cities. Business code 144 for additional hotel for those cities that have the additional hotel tax.
For short-term/vacation rentals, no special business codes are used to report the revenue received through an OLM or PMC.
Filing and Paying
You can register, file and pay online at www.AZTaxes.gov. It is fast and secure.
For e-file assistance and bulk filing information, see the e-solution section.
Short-term Rental Regulations
If you are aware of a rental property that is not licensed or registered, submit that information to the city/town and they can work with the property owner or agent to ensure they are in compliance.
Senate Bill 1168 outlines further regulations of vacation or short-term rentals and restructures the civil penalties for verified violations.
Other Business License Requirements
Municipalities - A city or town may impose additional requirements beyond the transaction privilege tax license. Check with the city or town in which a property is located for more information.
County Assessor Residential Rental Registration - In addition to the transaction privilege tax licensing requirements, all Arizona counties require residential rental properties to be registered with the County Assessor. There may be penalties and fines for properties not correctly identified or registered as a rental property with the County Assessor.
Information and Resources
Workshops - ADOR offers workshops dedicated for rental owners and property management companies. Check out the next event here.
For more information and resources on rentals, visit the following links:
If you need further assistance, please call (602)716-RENT(7368), or email [email protected].