Airbnb, HomeAway, and VRBO have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Anchorage, Fairbanks, and Juneau, The Last Frontier offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.
But new income opportunities bring new tax implications. Like hotel, motel, and B&B stays, short-term rentals in Alaska may be subject to tax. Tax authorities expect short-term vacation rental hosts to collect applicable short-term rental taxes from their guests and remit them to the proper authorities.
Failure to comply with tax laws can result in fines and interest penalties. These may not catch up with short-term rental operators in the short term, but the sharing economy is increasingly being placed under the proverbial microscope. It’s recommended that you address compliance before tax authorities address it for you.
Avalara has put together this guide to help you comply with Alaska short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.
Disclaimer: No short-term vacation rental tax guide is a substitute for professional tax advice. Consider it an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Alaska tax laws.
Short-term Rental Tax Basics
When you start operating a short-term rental, you may not have experience with lodging taxes, but you are probably familiar with income tax. It’s important to understand the difference between the two.
Income taxes are reported and paid annually to the federal and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
In contrast, a lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that is added to the price of the bill. The guest pays the tax, but you are responsible for collecting the tax and paying it to the proper tax authority. Taxes on short-term rentals can be known as room tax, sales tax, transient tax, lodging tax, occupancy tax, bed tax, tourist tax, and more.
What is the definition of “short-term rental” in Alaska?
In Alaska, there is no statewide definition of “short-term rental.” Local tax authorities may have their own definitions.
Who is required to collect and file taxes on short-term rentals in Alaska?
If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling in an Alaska municipality that levies lodging tax, you may responsible for collecting, filing, and remitting short-term rental taxes to Alaska authorities. You may be the property owner, a renter subletting a room, a third-party property management firm, or other party.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address will determine which tax jurisdiction you are required to report to, which taxes you need to collect, and your tax rates.
You can use our lodging tax lookup tool to get a rate report specific to your Alaska address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.
Registering with Authorities
In Alaska, short-term rental operators are required to obtain an Alaska Business License. You may also be required to register with local tax authorities. Be sure to check with them for details.
Do I need to form an LLC?
In Alaska, you do not need to form an LLC in order to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in Alaska should be aware of local regulations that apply to them, including rules covering:
- Permits, licenses, and registration
- Neighborhood notification
- Building and housing standards
Homeowner Associations (HOA) located in Alaska may also have specific rules regarding vacation rentals. As a member, it’s your responsibility to be aware of the association’s policy. It’s important to review this information to understand any restrictions or limitations on short-term vacation rentals.
Other rules and regulations associated with leases/subletting or condo/co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.
Collecting Short-term Rental Tax
Once you’re registered with tax authorities, you are ready to start collecting lodging tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to Alaska short-term rentals?
In Alaska, your short-term rental may be subject to local lodging taxes. The exact tax requirements for your short-term rental depend on its location.
Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s important to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues. Tax authorities should have the latest rates posted. You can also use our lodging tax lookup tool to find the right rates.
What charges are taxable?
In Alaska, each community may have its own rules on which short-term rental charges are taxable.
What happens when my short-term rental platform (such as Airbnb, HomeAway, or VRBO) collects taxes for me?
Before collecting any short-term rental tax from your guests, you need to be aware of whether any taxes have already been collected for you. Some vacation rental platforms collect Alaska short-term rental taxes for you when the listing is booked. However, platforms do not collect taxes in all locations, and they may not collect all the state and local taxes you owe.
At the time of this guide’s publication, Airbnb collects city room tax for hosts in Anchorage. HomeAway/VRBO do not collect lodging taxes on behalf of their hosts in Alaska.
Even if your online rental platform collects taxes for you, do not assume that the platform is taking care of short-term rental tax registration or filing for you. Check with your local tax authority and/or your rental platform.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Alaska. For example, a guest who rents for a long term rather than a short term will most likely be exempt from short-term lodging taxes. Exemptions are decided at the local level and may vary among locations.
Filing Short-term Rental Tax Returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the local tax jurisdiction. In order to file, you will need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due.
Take the time to double check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.
When do I need to file my returns?
You will be assigned a filing frequency and due dates when you register with the local tax authority. Monthly, quarterly, and annual filing frequencies are common.
Are there penalties for filing taxes late?
Whether you choose to offer short-term rentals through a marketplace like Airbnb or directly to the consumer, you open the door to tax liability. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with local tax laws. Failure to register with tax authorities and file short-term rental tax returns in Alaska on time may result in late fees, interest payments, and in extreme cases, legal action.
I have been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but are not collecting short-term rental taxes, you may be in violation of tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.
Short-term rental hosts may be able to take advantage of a voluntary disclosure agreement (VDA) with the local tax authority. A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the tax authority. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.
Are there options for outsourcing transient occupancy tax filing?
Yes. Many short-term rental hosts in Alaska file several lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.