In the State of Texas all owners and operators who rent a room or a space for more than $15 per day to an individual for less than 30 consecutive days must remit hotel occupancy tax to the state. However, depending on where your property is located, you may also be required to collect and remit local hotel occupancy tax. As a short term rental host, it’s important to understand how these taxes work, when you need to collect taxes, and how you will pay them. In the State of Texas, this hotel occupancy tax (HOT) rate is 6%. All incorporated municipalities in the State of Texas also have the ability to collect HOT revenue. It is up to each local body how much they want to charge with the maximum at 11% currently. The state law dictates that a city or county may not propose a hotel occupancy tax rate that would result in a combined hotel occupancy tax rate imposed from all sources that would exceed 17% of the price paid for the room. A city with a population of under 35,000 may also adopt the hotel occupancy tax within that city’s extraterritorial jurisdiction (ETJ). If a city adopts the hotel occupancy tax within its ETJ, the combined state, county, and municipal hotel occupancy tax rate may not exceed 15 percent. Homes in the city limits of Austin have the highest HOT rate compared to anywhere else in the Central Texas region. The City of Austin imposes an 11% HOT rate. Combine that with the state rate and Airbnb guests in Austin are paying a whopping 17% in hotel occupancy taxes. Luckily, airbnb owners in the ETJ of Austin only have to collect the 6% state HOT. Below you will find a breakdown of various municipal HOT rates throughout Central Texas: City of Austin 11% City of Bastrop 7% City of Cedar Park 7% City of Dripping Springs 7% City of Georgetown 7% City of Johnson City 7% City of Jonestown 7% City of Lakeway 7% City of Manor 7% City of Pfluggerville 7% City of Round Rock 9% City of Westlake Hills 7% City of Wimberley 7% As discussed earlier, all short term rental owners in Texas must collect and remit the 6% state tax from bookings. However, if you take bookings through the Airbnb platform, the state tax is automatically collected from guests at the time of booking. Since 2017, Airbnb has been remitting this tax directly to the state on hosts behalf, and in 2019 HomeAway began doing the same. Thus, for state HOT tax remittance, hosts only need to worry about paying these when a guest books directly with the host or through another platform that does not file with the state. Local HOT collection and remittance is another story. Booking platforms offer the ability to define your local HOT rate and automatically collect this from guests at the time of booking. However, local hotel occupancy tax revenue goes directly to the host and then must be remitted manually to the municipality by the host or short term rental management company. State Hotel Occupancy Taxes
Local Hotel Occupancy Taxes
Municipal HOT Rates in Central Texas
Remittance of Hotel Occupancy Taxes
STR Investing in Austin
As a short term rental investor, it’s important to understand the various aspects of hotel occupancy taxes. When you are analyzing potential deals or looking at revenue documents for the sale of a turnkey short term rental, pay attention to the hotel occupancy revenue numbers to ensure you are accurately analyzing the investment potential. As an STR owner, you will want to ensure you are accurately collecting, keeping track of, and remitting the appropriate amount of hotel occupancy taxes regularly. Have questions about buying a short term rental in Central Texas? We’re here to help! Give us a call today.
