Do Tennessee homeowners who rent out their house, apartment, or spare room through Airbnb or VRBO owe sales tax and hotel occupancy tax, and who has to collect it, the host or the website?

Plain-English summary

Representative Dale Carr asked three linked questions about Tennessee taxation of short-term home rentals booked through Airbnb and VRBO: do state sales tax and local hotel occupancy tax apply, and if so, who has to collect them, the host or the platform.

Sales tax. Yes. Tennessee Code Ann. § 67-6-205(c)(1) makes sales tax due on "any rooms, lodgings, or accommodations furnished to persons by any hotel, inn, tourist court, tourist camp, tourist cabin, motel, or any place in which rooms, lodgings or accommodations are furnished to persons for a consideration." A house, apartment, or room rented short-term fits that catch-all. There is, however, an "occasional and isolated sales" exception (§ 67-6-102(9)(B)): someone who rents their home once or rarely is not a dealer, but a person who does it regularly is.

Hotel occupancy tax. Yes, in jurisdictions that have adopted the tax. Two general statutes (§§ 67-4-1402 for home-rule cities and 7-4-102 for metro counties) and many private acts authorize local hotel occupancy taxes. The general statutes define "hotel" to include any "place in which rooms, lodgings or accommodations are furnished to transients for consideration." Short-term home rentals fit. For private acts (like Sevier County's), the analysis turns on the specific wording, but where the language tracks the general statutes, the rentals are taxable.

Who collects? The host. For sales tax, "dealer" includes "every person . . . who . . . [f]urnishes any of the things or services taxable" (§ 67-6-102(25)(H)). The host furnishes the rental; the website merely facilitates. For hotel occupancy tax, "operator" means "the person operating the hotel, whether as owner, lessee or otherwise" (§§ 7-4-101(6), 67-4-1401(5)). Again, the host operates the rental; the website does not.

The AG noted the Sixth Circuit's Hotels.com decisions (Columbus and Louisville) concluding that online travel companies were not "hotels" or "operators" of hotels under similar local-tax provisions. City of Goodlettsville v. Priceline.com reached the opposite conclusion in a different factual context where the OTAs marked up wholesale-rate purchases. For Airbnb-style peer-to-peer platforms, the AG agreed with the Columbus/Louisville analysis: the website is not the operator.

The hotel occupancy tax statutes contain no parallel to the sales tax's "occasional and isolated" exception. So an occasional one-off rental might owe hotel occupancy tax even when it does not owe sales tax, unless the local ordinance or a court reads such an exception in.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. In particular, several Tennessee jurisdictions and the state itself have adopted platform-collection statutes for short-term rentals since 2015; the host-collects rule may have been modified by statute.

Common questions

Q: Did the AG say Airbnb itself owes the tax?
A: No. The opinion concluded the host (the individual renting out the property) is the dealer for sales tax and operator for hotel occupancy tax. The website facilitates but does not furnish the lodging.

Q: How "occasional" does a rental have to be to escape sales tax?
A: The AG read "occasional" as "[n]ot habitual; infrequent" and "isolated" as "[s]olitary; alone." Someone who rents their lake house once during a family event probably qualifies. Someone who lists their home year-round on Airbnb does not.

Q: Does the hotel occupancy tax apply everywhere in Tennessee?
A: No. It applies only in jurisdictions that have adopted it, either under general law (home-rule cities and metro counties) or under a private act. Most counties and many cities have private-act hotel/occupancy taxes; the AG flagged Sevier County's as a specific example with language that captured short-term rentals.

Q: What is the practical compliance burden?
A: The AG noted Airbnb and VRBO let hosts set the rental price and specify taxes. So a host who knows their obligation can configure the listing to collect tax from the guest at checkout, then file periodic sales tax and occupancy tax returns with the Tennessee Department of Revenue and the local taxing jurisdiction.

Q: Could a host be liable for back taxes if they hadn't collected from past guests?
A: As a legal matter, yes; the tax is owed on the transaction regardless of whether the host collected from the guest. The host can be assessed for unpaid tax, plus penalties and interest. Voluntary disclosure programs sometimes offer reduced penalties; that procedural detail is outside this opinion.

Background and statutory framework

The Tennessee Retailers' Sales Tax Act (Tenn. Code Ann. § 67-6-101 et seq.) reaches "tangible personal property and certain services," including lodging rentals under § 67-6-205(c)(1). The catch-all "any place in which rooms, lodgings or accommodations are furnished to persons for a consideration" was designed to be broad and was applied here to peer-to-peer rentals.

The hotel occupancy tax framework is layered: general law under § 67-4-1402 (home-rule cities) and § 7-4-102 (metro counties), plus dozens of private acts authorizing specific counties or cities to levy the tax. The definitions of "hotel," "transient," and "operator" track closely across the general law and most private acts, which let the AG reach a single answer for most jurisdictions.

The dealer/operator analysis turns on who is functionally renting out the lodging. The federal appellate Hotels.com line of cases supports the host-not-platform answer for Airbnb-style platforms where the host sets the price and the platform takes a service fee.

Citations and references

Statutes:
- Tenn. Code Ann. §§ 67-6-101 et seq. (Retailers' Sales Tax Act)
- Tenn. Code Ann. § 67-6-205(c)(1) (taxable lodging services)
- Tenn. Code Ann. § 67-6-102(9)(B) (occasional and isolated exception)
- Tenn. Code Ann. § 67-6-102(25)(H) (definition of dealer)
- Tenn. Code Ann. §§ 67-6-501, -502 (dealer collection)
- Tenn. Code Ann. §§ 7-4-101 to -104 (metro county hotel occupancy tax)
- Tenn. Code Ann. §§ 67-4-1401 to -1405 (home-rule city hotel occupancy tax)
- Tenn. Comp. R. & Regs. 1320-05-01-.09(1) (occasional sales rule)

Cases:
- City of Columbus, Ohio v. Hotels.com, L.P., 693 F.3d 642 (6th Cir. 2012) (OTAs not operators)
- Louisville/Jefferson County Metro Government v. Hotels.com, L.P., 590 F.3d 381 (6th Cir. 2009) (accord)
- City of Goodlettsville v. Priceline.com, Inc., 605 F. Supp. 2d 982 (M.D. Tenn. 2009) (OTAs as operators on wholesale-resale facts)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2015/op15-78.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
December 1, 2015

Opinion No. 15-78

Tax on Short-Term Rentals of Homes, Apartments, and Rooms Arranged Through Websites

Question 1

Is sales tax due on short-term rentals of homes, apartments, and rooms in Tennessee that are arranged through websites such as www.airbnb.com and www.vrbo.com?

Opinion 1

Yes. The short-term rentals described in your request are subject to sales tax under Tenn. Code Ann. § 67-6-205(c)(1).

Question 2

Do these rentals qualify as "hotels" subject to a hotel occupancy privilege tax, levied pursuant to Tenn. Code Ann. § 67-4-1402, or any other general law or private act imposing a tax on transient lodging?

Opinion 2

Yes. The short-term rentals described in your request meet the statutory definition of "hotel" under Tenn. Code Ann. § 67-4-1401(2) and are thus subject to the hotel occupancy privilege tax in home-rule cities that have adopted the tax authorized by Tenn. Code Ann. § 67-4-1402. The short-term rentals also meet the statutory definition of "hotel" under Tenn. Code Ann. § 7-4-101(4) and are thus subject to the hotel occupancy privilege tax in metropolitan counties that have adopted the tax authorized by Tenn. Code Ann. § 7-4-102. Most counties and municipalities that levy a hotel occupancy privilege tax are authorized to do so by individual private acts. The applicability of each occupancy tax will depend upon the language of the authorizing private act; however, where the private act uses language similar to the language used in Tenn. Code Ann. §§ 7-4-101 and 67-4-1401, the short-term rentals described in your request will be subject to the tax.

Question 3

If the answer to question 1 or 2 is yes, who is responsible for collecting and paying those taxes, the owner of the property or the website facilitating the rental?

Opinion 3

The property owner is ultimately responsible for collecting and paying the sales tax under Tenn. Code Ann. §§ 67-6-501 and -502 and for collecting and paying the hotel occupancy privilege tax under Tenn. Code Ann. §§ 7-4-103 and -104 and 67-4-1404 and -1405. The property owner will likewise be responsible for collecting and paying the hotel occupancy privilege tax in counties and municipalities where the private act authorizing the tax uses language similar to the language in Tenn. Code Ann. §§ 7-4-103 and -104 and 67-4-1404 and -1405.

ANALYSIS

We are informed that, in recent years, individuals in Tennessee have chosen to use popular websites such as www.airbnb.com and www.vrbo.com ("the websites") to rent their homes, apartments, or rooms to guests on a short-term basis. Many of these individuals do not collect sales tax or a hotel occupancy privilege tax from their renters.

The websites provide a platform for individuals to list their homes, apartments, or rooms for rent on a short-term basis. The websites allow consumers to search for available short-term rentals, communicate with individuals who have listed their homes for rent, and book and pay for short-term rentals online. The requestor asks whether these short-term rentals are subject to sales tax and hotel occupancy privilege tax, and, if so, who is responsible for collecting and paying the taxes.

1. Sales Tax

The sales tax is a tax on the retail sale of tangible personal property and certain services in Tennessee. See generally Tenn. Code Ann. §§ 67-6-101 et seq. The services that are subject to Tennessee's sales tax include "[t]he sale, rental or charges for any rooms, lodgings, or accommodations furnished to persons by any hotel, inn, tourist court, tourist camp, tourist cabin, motel, or any place in which rooms, lodgings or accommodations are furnished to persons for a consideration." Tenn. Code Ann. § 67-6-205(c)(1). The tax does not, however, apply to rentals to the same person for 90 continuous days or more. Id. We assume that the rentals described in your request as "short term" are for a period of less than 90 days.

The transactions described in your request are short-term rentals of "rooms, lodgings, or accommodations," and the homes, apartments, and rooms that are rented are "place[s] in which rooms, lodgings or accommodations are furnished to persons for a consideration." Id. These short-term rentals are therefore taxable under Tenn. Code Ann. § 67-6-205(c)(1).

"Dealers" are responsible for collecting and remitting the sales tax. Tenn. Code Ann. §§ 67-6-501 and -502. "Dealer" is defined in pertinent part as "every person . . . who . . . [f]urnishes any of the things or services taxable under this chapter." Tenn. Code Ann. § 67-6-102(25)(H). In the transactions described in your request, the individuals who rent their homes on a short-term basis via the websites are the persons who furnish the taxable service of renting rooms, lodgings, or accommodations. The websites facilitate the transactions, but they do not furnish the taxable service. In these transactions, therefore, the individuals who rent their homes on a short-term basis are "dealers" and are responsible for collecting and paying the sales tax.

The sales tax does not, however, apply to "occasional and isolated sales or transactions." Tenn. Code Ann. § 67-6-102(9)(B); Tenn. Comp. R. & Regs. 1320-05-01-.09(1). In this context, "occasional" means "[n]ot habitual; infrequent," and "isolated" means "[s]olitary; alone." The American Heritage College Dictionary 720, 943 (3rd ed. 1993). Accordingly, individuals who regularly or frequently rent their homes on a short-term basis are responsible for collecting and remitting the sales tax, while individuals who rent their homes on a short-term basis infrequently or irregularly or only once are not responsible for collecting and remitting the sales tax.

2. Hotel Occupancy Privilege Tax

Tennessee Code Annotated § 67-4-1402(a) authorizes incorporated cities that have adopted home rule "to levy by ordinance a privilege tax upon the privilege of occupancy in any hotel of each transient in an amount not to exceed five percent (5%) of the consideration charged by the operator." "Hotel" is defined as

any structure or space, or any portion thereof, that is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, and includes any hotel, inn, tourist camp, tourist court, tourist cabin, motel or any place in which rooms, lodgings or accommodations are furnished to transients for consideration.

Tenn. Code Ann. § 67-4-1401(2). "Transient" is defined as "any person who exercises occupancy or is entitled to occupancy of any rooms, lodging or accommodations in a hotel for a period of less than thirty (30) continuous days." Tenn. Code Ann. § 67-4-1401(7).

Tenn. Code Annotated § 7-4-102(a) similarly authorizes counties having a metropolitan form of government and certain municipalities to levy "a privilege tax upon the privilege of occupancy in any hotel of each transient in an amount not to exceed three percent (3%) of the consideration charged by the operator." Additional one-percent privilege taxes are authorized for metropolitan counties having a population in excess of 100,000, Tenn. Code Ann. § 7-4-102(a)(2); metropolitan counties that have entered into a binding contract with a general contractor for the construction of a convention center, Tenn. Code Ann. § 7-4-102(b)(1); and metropolitan counties having a population in excess of 500,000, Tenn. Code Ann. § 7-4-102(b)(2). The statute's definitions of "hotel" and "transient" are nearly identical to the definitions of those terms in Tenn. Code Ann. § 67-4-1401. Compare Tenn. Code Ann. § 7-4-101 and Tenn. Code Ann. § 67-4-1401.

Most counties and municipalities that levy a hotel occupancy privilege tax are authorized to do so by individual private acts. For example, Chapter 12 of the Private Acts of 2007 authorizes the legislative body of Sevier County "to levy a privilege tax upon the privilege of occupancy in any lodging of each transient, in an amount not to exceed three percent (3%) of the rate charged by the operator." 2007 Tenn. Priv. Acts ch. 12, § 2.

The homes, apartments, and rooms described in your request are structures or spaces or portions thereof that are occupied by transients "for dwelling, lodging or sleeping purposes" and are "place[s] in which rooms, lodgings or accommodations are furnished to transients for consideration." Tenn. Code Ann. §§ 7-4-101(4) and 67-4-1401(2). The homes, apartments, and rooms thus meet the statutory definitions of "hotel" in Tenn. Code Ann. §§ 7-4-101 and 67-4-1401, and the short-term rentals are therefore subject to the hotel occupancy privilege tax in localities that have adopted such a tax under the authority of Tenn. Code Ann. § 7-4-102 or § 67-4-1402. The homes, apartments, and rooms also meet the definition of "lodging" in the private act authorizing Sevier County's lodging occupancy privilege tax, and the short-term rentals are thus subject to the tax in Sevier County and in other localities that have similar authorizing private acts.

Under the statutes described above, hotel "operators" are required to collect and remit the hotel occupancy privilege tax. Tenn. Code Ann. §§ 7-4-103 and -104 and 67-4-1404 and -1405. "Operator" is defined as "the person operating the hotel, whether as owner, lessee or otherwise." Tenn. Code Ann. §§ 7-4-101(6) and 67-4-1401(5). "Operate" means "[t]o control the functioning of; run." The American Heritage College Dictionary 956 (3rd ed. 1993).

In the transactions described in your request, the individuals who rent their homes on a short-term basis via the websites are the owners or lessees of the "hotels" and have control over the "hotels." The websites are not the owners or lessees of the "hotels" and do not have control over the "hotels." The individuals who rent their homes via the websites are therefore the "operators" of the "hotels" and are responsible for collecting and remitting the hotel occupancy privilege tax. See City of Columbus, Ohio v. Hotels.com, L.P., 693 F.3d 642, 648-50 (6th Cir. 2012) (holding that online travel companies were not hotels or operators of hotels under Ohio local ordinances); Louisville/Jefferson County Metro Government v. Hotels.com, L.P., 590 F.3d 381 (6th Cir. 2009) (holding that online travel companies were not "like or similar accommodations businesses" responsible for collecting occupancy tax under Kentucky law). But see City of Goodlettsville v. Priceline.com, Inc., 605 F. Supp. 2d 982, 993-97 (M.D. Tenn. 2009) (ruling that online travel companies were "operators" of hotels where online travel companies purchased rooms from hotels at a wholesale rate and resold those rooms to consumers at retail).

"Operators" are likewise required to collect and remit Sevier County's lodging occupancy privilege tax, which contains a similar definition of "operator." 2007 Tenn. Priv. Acts ch. 12, §§ 1(6), 3, and 5. The property owners are thus responsible for collecting and remitting the tax in Sevier County and in other localities that have similar authorizing private acts.

The statutes authorizing localities to enact a hotel occupancy tax do not contain an exception for "occasional and isolated sales or transactions" similar to the exception in the sales tax. It is thus possible that an "occasional" or "isolated" short-term rental would be subject to hotel occupancy tax, but not sales tax, unless the local ordinance enacting the tax creates an exception for "occasional and isolated" transactions or the courts imply such an exception.

The websites allow individuals who list their homes for rent on a short-term basis to set the price of the rental and to specify any taxes that are due from guests. It should thus not be overly burdensome for individuals who rent their homes via the websites to satisfy their obligation to collect and remit sales tax and hotel occupancy privilege tax.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

R. MITCHELL PORCELLO
Senior Counsel

Requested by:
The Honorable Dale Carr
State Representative
214 War Memorial Building
Nashville, Tennessee 37243-0108