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 Bismarck and Fargo, The Peace Garden State 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 North Dakota are subject to tax. Tax authorities expect short-term vacation rental hosts to collect 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 North Dakota 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 North Dakota 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 sales tax, lodging tax, occupancy tax, bed tax, tourist tax, and more. In North Dakota, the total tax rate you charge your guest is made up of different state and local taxes..
What is the definition of “short-term rental” in North Dakota?
In North Dakota, all lodging that is rented for a period of fewer than 30 days is subject to state and local taxes. Residents staying longer than this should not be charged short-term rental taxes.
Who is required to collect and file taxes on short-term rentals in North Dakota?
If you are renting out a home or rooms in a home independently or through an online service that doesn’t collect tax for you, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to North Dakota 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 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 North Dakota 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 State Authorities
If you are operating short-term rentals independently or through an online service that doesn’t collect tax for you, you are legally required to register with the North Dakota Office of State Tax Commissioner. You can register online. When you register, you will receive a sales tax permit as well as instructions on filing your lodging taxes.
Do I need to form an LLC?
In North Dakota, 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 North Dakota 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 North Dakota 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 North Dakota short-term rentals?
In North Dakota, a number of different lodging taxes may apply to your short-term rental, depending on your location. These can include:
|Tax Name||Filed and Remitted To|
|State sales tax||North Dakota Office of State Tax Commissioner|
|City and/or county sales tax||North Dakota Office of State Tax Commissioner|
|City lodging tax||
North Dakota Office of State Tax Commissioner*
*Certain locations require city lodging taxes to be filed with your local tax authority, in addition to taxes remitted to the State Tax Commission.
|City lodging and restaurant tax||North Dakota Office of State Tax Commissioner|
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. State and local 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 North Dakota, all charges for accommodations are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes unless you keep the deposit.
However, services offered to customers, such as in-room movie and game rentals, valet, laundry, or babysitting, are not taxable under North Dakota sales tax law.
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 North Dakota 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 state sales tax, city and/or county sales and gross receipts tax, city lodging tax, and city lodging and restaurant tax for all North Dakota hosts.
HomeAway/VRBO do not collect lodging taxes on behalf of their hosts in North Dakota.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in North Dakota. For example, a guest who rents for a long term rather than a short term will be exempt from short-term lodging taxes. In North Dakota, accommodations purchased by buyers including federal and state government entities, federal chartered corporations, public and private nonprofit schools, and healthcare organizations may be exempt from short-term lodging taxes. Guests may be required to present exemption certificates.
Filing Short-term Rental Tax Returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the North Dakota Office of State Tax Commissioner. In North Dakota, you can file short-term rental tax returns online. 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, usually via check or electronic transfer. The North Dakota Office of State Tax Commissioner allows credit card payments, but you may be charged convenience fees for this type of payment.
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 tax authority. At the state level, annual, semiannual, quarterly, and monthly due dates are as follows:
|Filing Frequency||Due Date|
|Annually||Due the last day of the month following the close of the filing period.|
|Semi-annually||Due the last day of the month following the close of the filing period.|
|Quarterly||Due the last day of the month following the close of the filing period.|
|Monthly||Due the last day of the month following the close of the filing period.|
I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the North Dakota Office of State Tax Commissioner?
Yes. Short-term rental operators registered with the North Dakota Office of State Tax Commissioner are required to file returns each assigned filing period, regardless of whether you had any short-term rental income or any short-term rental taxes were collected. Such returns are commonly known as “zero dollar returns.”
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 at the state and local level. 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 North Dakota 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 North Dakota 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 in North Dakota may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the North Dakota Office of State Tax Commissioner. 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 North Dakota file several lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.