Are you curious about the dynamic world of short-term rentals (STR) in the diverse state of Arizona? Get ready as we embark on an exciting exploration of the multifaceted vacation rental landscape in the Grand Canyon State!

This guide will demystify the intricacies of short-term rentals, covering everything from legal aspects to essential details that can boost your hosting success in Arizona. We dive into the vital questions every aspiring host should consider before diving into this lucrative market in the State.

In Arizona, the definition of short-term rentals is established by state law. According to the statute, a "short term rental" includes any individually or collectively owned single-family or one-to-four-family house or dwelling unit, or any unit or group of units in a condominium, cooperative, or timeshare. These are considered short term rentals if they function as transient public lodging establishments or owner-occupied residential homes offered for transient use, provided the accommodations are not classified for property taxation under section 42-12001 of the Arizona Revised Statutes.

Short-term residential rentals are lodging rental stays for less than 30 days.

In Arizona, short-term residential rentals, defined as lodging rental stays for less than 30 days, are subject to the Arizona Transaction Privilege Tax (TPT). Property owners who rent out residences for periods shorter than 30 days are required to have a TPT license and must report and remit TPT for the state, county, and city. The specific business code used for reporting these transactions depends on the location of the property and the type of rental. For state and county reporting, business code 025 (transient lodging) is used, while business code 044 (hotel/motel) is used for city transactions. In some cities, an additional hotel tax may apply, reported under business code 144.

Rates for the combined state and county transient lodging tax vary by location. For example, as of February 1, 2023, the rates ranged from 5.5% in Mohave County to 7.27% in Maricopa County. Additionally, most Arizona cities also levy a local tax on transient lodging. The exact rate and the requirement for an additional city tax depend on the location of the rental property.

It's important to note that property owners or operators must include their TPT license number in any advertising associated with the short-term rental. If a property is only rented out seasonally, such as for the Super Bowl, a seasonal Arizona TPT license is required. This license should be active for the duration of the rental period and canceled afterward if the property is not going to be rented out again.

Furthermore, income received from online lodging marketplaces (OLMs) should be reported using the same business codes, but 100% of the income received from the OLM should be deducted using deduction code 775. The OLM is responsible for collecting and remitting the TPT due from the rental income.