What is Transient Occupancy Tax?


For a majority of vacation rental property owners, the easiest part of owning a vacation rental is hosting. Hosting is similar to welcoming guests into your own home with the preparation of cleaning and making things comfortable before your guests arrive.

What can seem overwhelming and confusing is the business jargon and legal requirements of running a vacation rental business. Figuring out all of your responsibilities for legally owning a short-term vacation rental can feel like trying to swim in rough waters as you try and frantically paddle through issues that quickly mount up over your head. This can be especially true for brand new short-term rental owners but can also continuously catch even seasoned owners off-guard.

One of the most confusing areas of short-term rental ownership is what tax responsibility you have as a landlord and investment property owner. In the state of California, there is a thing called transient occupancy tax. If you own a vacation rental in Palm Springs or Coachella Valley you will be subject to this tax. Here is some good information to know.

What is transient occupancy tax?

“Every state across the country has its own version of occupancy or hotel tax. In the state of California, this tax is labeled as transient occupancy tax or TOT. This tax is focused on any person who rents shelter for less than 30 days in a calendar month by reason of concession, permit, right of access, license, or other agreement.” – by Norfolk Real Estate Professional Crescas Real Estate

In simpler terms, it is a tax put on short-term vacation rentals in the state of California. The percentage that the property owner is responsible to pay is dependent upon where the vacation rental is located. Every city and county will have a different amount that a property owner is responsible for. Often areas with higher tourism levels or local housing requirements will set their own standard apart from state standards.

Who is responsible for transient occupancy tax?

Transient occupancy tax is charged directly to guests renting out the short-term vacation property. However the tax is collected by the property owner and the property owner is responsible for collecting, reporting, and paying these tax fees directly to the government.

In some areas, these taxes can be paid online in a special reporting section. In other counties, it is required that a property owner pay these as part of quarterly taxes. It is within the best interest of a short-term vacation rental owner to know how and where to pay this tax responsibility.

Transient occupancy taxes for the city of Palm Springs

Palm Springs has long been a tourist hotspot in California and is becoming more popular with short-term vacation rental homes. It is a desert city most popularly known for golf courses, spas, Hot Springs, and of course, its proximity to large festivals like Coachella.

The city of Palm Springs has two transient occupancy taxes one for group meeting hotels and one for all other types of hotels and vacation rentals. The rate for group hotels is 13.5% while the rate for all other types of vacation accommodations is 11.5%.

The city of Palm Springs requires that transient occupancy tax returns be reported every month even if the rental property did not have any renting/paying guests. This report can be submitted with payment online.

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