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Sales – Residential Short-Term Rentals
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Residential short-term rentals are a place to stay or live. They are a form of lodging and related services.
Examples of residential short-term rentals:
- Homes
- A portion of a home
- Any other property used for a temporary place to stay or live
Charges for the rentals are subject to the general rate sales tax and any applicable local and lodging taxes. See Sales – Lodging and Related Services.
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Facilitating the sale of lodging includes “brokering, coordinating, or in any way arranging for purchase of or the right to use accommodations by a customer.”
Facilitating the sale of lodging includes both:
- Collecting receipts from the customer of the lodging
- Transmitting the receipts to the owner of the residential property, whether the accommodations intermediary deducts or causes to be deducted any fees or other amounts from those receipts, either:
- Directly by the accommodations intermediary or
- Indirectly through agreements or arrangements with third parties
Facilitating the sale does not include only advertising the availability of the residential property for short-term rental, which directs the customer of the lodging to contact the owner of the property to reserve and purchase the lodging.
For all residential short-term rentals, who facilitates the sales transaction determines who is responsible for the tax. See the chart below for details.
| Residential Short-Term Rental Situations |
Who’s Responsible for the Tax* |
|---|
The residential property is located in Minnesota and both conditions apply:
- The owner regularly furnishes lodging directly to a customer in the normal course of business (done for the purpose of profit or producing income)
- The customer makes the reservation with and pays the owner for the lodging and related services
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The property owner must register as a retailer to collect, report, and remit taxes on the full sales price of lodging and related services. |
The residential property is located in Minnesota and the owner uses the services of an accommodations intermediary to facilitate all sales of lodging at the owner’s property. |
The accommodations intermediary must register as a retailer to collect, report, and remit taxes on the full sales price of lodging and related services. |
| The residential property is located in Minnesota and the rental of the business property by the owner is an isolated incident, not made in the normal course of business. See Isolated or occasional sales section below. |
The property owner is not required to register or collect taxes on the sale. |
|
The residential short-term rental is facilitated by both:
- The property owner in the normal course of business
- An accommodations intermediary to facilitate short-term lodging
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Both the owner and the intermediary are responsible for sales tax. The sales tax is handled as follows:
- The property owner is required to collect, report, and remit taxes on the lodging and related services where they did not use the services of an accommodations intermediary.
- The accommodations intermediary is required to collect, report, and remit taxes on the lodging and related services they facilitated.
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*You must keep documentation to support who facilitated the sale and was responsible for remitting the applicable taxes on the lodging and related services.
For more information, see Revenue Notice 17-06, Lodging and Related Services – Residential Short-Term Rentals.
For sales tax, a sales tax exemption will apply to the short-term rental in Minnesota if the sale is isolated or occasional, and not made in the normal course of business of selling lodging and related services. An “isolated sale” happens once. An “occasional sale” is infrequent and does not reoccur with some degree of regularity. Normal course of business is defined as activities that demonstrate a commercial continuity or consistency of making sales or performing services for the purposes of attaining profit or producing income.
For income tax purposes, the Internal Revenue Code (IRC) provides an isolated sale exemption when you rent out for 14 days or less a year a property that you also use as your home. This is an exemption from income tax on that rental income. However, this exemption does not apply to sales tax. Unless a sales tax exemption applies, you must collect sales tax on the short-term rental of your property.
