Accomodation and Occupancy Tax

                When purchasing a rental property it is important to decide whether you plan on renting to someone long term or for short term vacation rentals. A lot of times the type and location of the property will make this determination for you. However, there are different state and county tax implications for both. The North Carolina Department of Revenue requires an accommodations tax to be charged, withheld, and remitted to the state for all rental properties unless they meet the following two common exceptions:

(1)    Private residence or similar accommodation that is rented for fewer than 15 days in a calendar year if not listed by a real estate broker or agent

(2)    Private residence or similar accommodation rented to the same person for a period of 90 or more continuous days

The accommodations tax is equal to the applicable sales tax for the county where the rental property is located. For example, a Carolina Beach condo would need to collect and remit 7% sales tax on short term vacation rentals that do not meet the above exceptions. The requirements for how often these taxes need to be remitted and when can be found here:

http://www.dornc.com/taxes/sales/frequency.html

In addition to the accommodations tax, each county and/or city can charge a separate occupancy tax. In New Hanover County the occupancy tax is 6% for short term rentals. The county specifies a short term rental as “less than 90 days in a hotel, motel, beach house, condo, corporate apartment or other such short term rental”. The form for this tax remittance can be found here:

http://tax.nhcgov.com/wp-content/uploads/2014/04/occupancy-report-filing-document.pdf

This means that for the above Carolina Beach condo 13% needs to be tacked onto the rental rate and remitted to the state and county on each rental property that do not meet the above exceptions. This information is not only useful for rental property owners, but when looking at vacation spots factor in the local taxes. You may be hit with a surprising addition to your rental price!