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Arizona Short Term Rental Laws & Airbnb Regulations

Few restrictions, just procedures

Arizona Short Term Rental Laws & Airbnb Regulations

Key takeaways

Arizona Short Term Rental Laws & Airbnb Regulations

As the 8th most visited state in the US, Arizona has always been a great place for investing in Airbnb rentals. Home to the Grand Canyon, Saguaro National Park, and the Hoover Dam, Arizona attracts millions of tourists each year, many of whom choose to stay at vacation rentals rather than hotels. In 2021 Arizona received 40.9 million overnight visitations, and we expect this number to grow as the last Covid-related travel ban policies fall.

But are non-owner occupied short-term rentals legal and relatively unrestricted in the Grand Canyon State? This is one of the first questions that investors need to answer before even starting searching for profitable Airbnb opportunities in the market. Doing all the research on statewide and local Arizona short-term rental laws can be confusing and overwhelming, particularly for beginner investors.

That’s why we’ve put together this guide on everything you need to know about Airbnb laws and regulations in Arizona. We’ll look at how Arizona and seven of its most popular cities define short-term rentals, what permits and licenses are needed, and what taxes you’d have to pay.

In brief, the State of Arizona boasts some of the most Airbnb friendly laws which prohibit local authorities from imposing major restrictions. Still, different cities in Arizona have various regulations. Let’s see which locations make for the best short-term rental markets based on the regulatory framework.

Thinking of buying an investment property in Arizona? Or already owning a rental property there that you want to convert into a vacation rental?

Connect with the Awning vacation rental management team to discuss the address, whether it qualifies for a short-term rental, and how to move forward. 

Arizona’s Definition of a Short Term Rental

Arizona defines short-term rentals in Arizona Revised Statutes Section 9-500.39. Short-term rental and vacation rental are used interchangeably to mean an individual or collectively owned single-family or one-to-four-family house or dwelling unit or a group of units in a condominium or cooperative that is also a transient public lodging establishment or owner-occupied residential home offered for transient use if the accommodation is not classified for property taxation under Section 42-12001. This definition excludes units used for any nonresidential use including retail, restaurant, event center, and others.

This definition sets Arizona apart from most states as other markets usually add a limit on the number of consecutive days for which a property is rented out in order to qualify as a short-term rental. In addition, states like Colorado and Oklahoma do not have statewide short-term rental definitions at all.

Meanwhile, most Arizona cities define short-term rentals as a dwelling unit offered as transient lodging for remuneration for a period of less than 30 consecutive days. This is in line with the short-term rental laws of most US states like Texas, California, and Florida. Major exceptions to this prevailing rule are North Carolina and Alabama, where vacation rentals are defined as renting out for fewer than 90 and 180 consecutive days, respectively.

Starting a Short Term Rental Business in Arizona

Starting an Airbnb business in Arizona is very easy and does not require many procedures, at the state level. However, as of recently, individual Arizona municipalities may have their own regulations regarding permits and licenses, so investors need to check the local requirements when starting a short-term rental business.

What is required statewide is to get the registration and documentation in order to pay state transaction privilege tax, county excise tax, and local transient occupancy tax. The State of Arizona requires online vacation rental property marketplaces including Airbnb and Vrbo to collect and remit taxes on behalf of listings, which makes it easier for Arizona Airbnb hosts to start and run a rental business.

Short Term Rental Licensing Requirement in Arizona

Short term rental property owners in Arizona do not need to get any licenses and permits at the state level.

Importantly, at the beginning of 2017 the State of Arizona passed Senate Bill 1350, which severely restricted the ability of local authorities to regulate and limit the vacation rental industry across Arizona. This has been one of the main reasons behind the widespread growth of Airbnb rentals in the state.

In specific, according to SB 1350, Arizona cities and towns can neither prohibit short-term rentals nor restrict their use solely based on classification, use, or occupancy. In addition, it prevented local authorities from requiring short-term rental licenses or permits. This made Arizona one of the most liberal and unrestricted markets for vacation rentals across the US.

However, in 2022 Arizona state authorities signed Senate Bill 1168, which now allows cities and towns to require vacation rental owners to get and maintain a local regulatory license or permit. This amendment helps local authorities maintain public health and safety, which has always been of utmost importance to the Arizona state authorities. License and permit applications can only ask for the following information:

  • Owner or owner’s agent name, address, phone number, and email
  • Short term rental property address
  • Proof of compliance with applicable laws, regulations, and ordinances
  • Contact information
  • Fee not exceeding the actual cost of issuing the license/permit or $250, whichever is less

Despite this recent change in Arizona short-term rental laws, the state remains one of the most conducive locations for running a vacation rental business.

License Renewals for Short Term Rentals in Arizona

The State of Arizona does not require short-term rental owners and operators to get licenses or permits, so there is no need to renew any documentation at the state level.

Individual Arizona cities which have enacted their own vacation rental regulations might ask for renewals.

Required Documents for Arizona Short Term Rentals

As a new Arizona Airbnb host, the only statewide documents you need are those related to paying Arizona transient privilege tax (TPT), commonly referred to as sales tax. This requires applying for a TPT license, which can be done online.

The TPT license application steps are:

  • Registering an online account by filling in some information
  • Setting up an e-signature PIN
  • Linking your accounts

This process should not take more than a few minutes.

Arizona Transaction Privilege Tax Licenses have to be renewed annually.

Business owners in Arizona have access to the Business One Stop (B1S) portal, where they can work on all legal issues related to running a business in the state, including tax licenses.

Arizona Short Term Rental Taxes

Vacation rental property owners are expected to pay three types of Arizona short term rental taxes.

These include:

  • State TPT: The rate varies between counties and cities but is in the range of 2% to 3.5%.
  • County excise tax: This is usually imposed at a rate of 10% of the state TPT.
  • Local transient occupancy tax: The rate is different per city, usually between 2% and 5.5%.

Arizona Vacation Rental Tax Deductions

Federal laws stipulate Arizona vacation rental property owners are eligible for short-term rental tax deductions as long as they rent out their second home for at least 14 days per calendar year and occupy it for only 14 days per calendar year.

Arizona Airbnb hosts can deduct the following expenses when filing taxes:

  • Mortgage interest
  • Mortgage premium insurance
  • Property tax and other taxes
  • Depreciation
  • Rental property maintenance
  • Utilities
  • Supplies offered to guests
  • Fees related to cleaning, accounting, legal services, and other business operations
  • Travel expenses incurred on managing the property
  • Home office costs

It is important to benefit from all these deductions as they can help you optimize your cash flow and Airbnb profit margins.

Statewide Short Term Rental Rules in Arizona

The State of Arizona does not have short-term rental laws and regulations except for those related to paying taxes. These apply to running any Arizona business and are not specific to vacation rental properties. This makes Arizona comparable to the rest of US states. As an exception, Florida and New York short-term rental laws impose regulations on the state level.

Short Term Rental Rules by Arizona City

Arizona has one of the most Airbnb friendly statewide legislations in the US market. The state not only does not impose short-term rental rules but also limits the rights of cities and towns.

Individual cities have been able to enact their own Airbnb laws. In the following see will take a loo- at the short term rental rules by Arizona city in the seven top markets in the Grand Canyon State.

Phoenix Short Term Rental Laws

The City of Phoenix, the capital of Arizona, uses the same definition as the State of Arizona for short-term rentals and makes them identical to vacation rentals. Phoenix Airbnb-style rentals are regulated by Ordinance G-6653.

A Phoenix vacation rental owner must register on a form or platform specified by the city. The registration should contain the following information:

  • Property owner name or statutory agent name if a business entity
  • Property address
  • Property owner or property owner’s agent phone number and email address. This person should be available to respond to complaints in person, over the phone, or by email at any time of the day.

Following this registration, each property will be provided with a vacation rental registration number.

According to the Phoenix short-term rentals laws, vacation rental properties cannot be used for nonresidential purposes, holding special events that require licenses or permits, running a retail business, and other improper purposes. Violations are subject to penalties starting at $500.

The transient hotel lodging tax rate in Phoenix is 3%. The combined rate which vacation rental owners have to pay for all state, county, and city taxes is equivalent to 12.57%.

The popularity of Phoenix among tourists and the lean vacation rental rules make it one of the best cities to buy rental property to rent out on a short-term basis. Few major US cities still allow non-owner occupied short-term rentals in the same manner that Phoenix does.

Tucson Short Term Rental Laws

The City of Tucson has not enacted its own vacation rental regulations. This means that Tucson Airbnb business owners should comply with the general Arizona short-term rental laws. This makes non-owner-occupied properties legal and unrestricted, so Tucson is a good place to invest in Airbnb.

Meanwhile, the Tucson lodging tax rate is 12.05% in addition to a fee of $2 per bed per night.

Sedona Short Term Rental Laws

In September 2022 the City of Sedona passed Ordinance 2022-08 to update its regulations on the vacation rental industry. Sedona defines short-term rentals according to the Arizona-wide definition.

A Sedona vacation rental property owner needs to:

  • Provide the city with the name, address, email, and phone number of an emergency point of contact who is available 24/7 to respond to complaints, emergencies, and other incidents at the property within 60 minutes of a call, by phone or in person.
  • Ensure property compliance with all applicable fire, building, health, and safety codes and other relevant state and local laws.

Operating a Sedona Airbnb business does not require a short-term rental license or permit.

The combined county and city bed tax and hotel tax rate to be paid by Sedona short-term rental property owners amounts to 13.325% in Yavapai County and 13.9% in Coconino County.

Similar to other Arizona cities, Sedona offers excellent opportunities for investing in non-owner occupied vacation rentals.

Prescott Short Term Rental Laws

The City of Prescott follows the general Arizona short-term rental definition, while limiting the maximum occupancy to only 29 consecutive days. Vacation rentals need to be registered with the city before being advertised.

There are two broad types of Prescott vacation rental registrations:

  • Vacation rentals in residential zoning, not occupied by the owner during renting, and different from hotels, motels, or bed and breakfasts need to apply for:
  • Transaction Privilege Tax License issued by the Arizona Department of Revenue
  • Vacation Rental Registration with the City of Prescott
  • Operational Requirements and Standard Conditions
  • Vacation rentals in commercial zoning, occupied by the owner during renting of rooms, or operating as a hotel, motel, or bed-and-breakfast need to apply for:
  • Transaction Privilege Tax License issued by the Arizona Department of Revenue only

This means that Prescott non-owner occupied short-term rentals in residential zoning require a vacation rental registration, similar to Phoenix Airbnb rentals.

Registering a vacation rental in Prescott, Arizona can be done online only and requires:

  • Property address
  • Property owner name, address, and phone number
  • Property owner’s agent name, address, and phone number if applicable
  • Local contact name, address, and 24/7 phone number
  • Number of bedrooms
  • Valid Arizona Transaction Privilege Tax License
  • Initial application fee of $95 including a onetime safety inspection fee of $65 and an annual vacation rental registration fee of $30

Registrations need to be renewed annually for a fee of $30.

The combined bed tax on hotel/motel and transient lodging is 12.075% in Prescott.

Like the rest of cities in the Arizona market, non-owner short-term rentals are legal and relatively unregulated in Prescott, which makes this location ideal for investing in the Airbnb rental strategy.

Lake Havasu City Short Term Rental Laws

Like the rest of Arizona cities, Lake Havasu City defines short-term rentals based on the Arizona definition.

Lake Havasu City vacation rentals need to be registered before they can operate.

Registrations are submitted online and should include the following details:

  • Property address
  • Property owner name, address, and phone number
  • Property owner’s designee or agent name, address, and phone number, to be available 24/7 to respond to any complaint by phone within 30 minutes or in person within 45 minutes
  • Local contact person, name, and address
  • Evidence of valid Arizona Transaction Privilege Tax License

A Lake Havasu City short-term rental property owner needs to assure compliance with all applicable fire, building, health and safety, and other relevant codes and laws. Violations will be subject to daily penalties starting at $500.

Airbnb hosts in the Lake Havasu City market have to pay a total hotel activity tax rate of 10.5% of gross income.

Lake Havasu City is yet another top location for investing in vacation rental properties in Arizona because of the interest from tourists and the conducive local Airbnb regulations.

Peoria Short Term Rental Laws

The City of Peoria uses the term transient lodging to define short-term rentals, and these can include houses, apartments, condominiums, townhouses, manufactured homes, mobile home spaces, group homes, assisted living facilities, and residential spaces rented for less than 30 consecutive days.

To run a legal Peoria Airbnb business, the property owner needs to get and maintain a valid Arizona TPT License. Multiple Peoria vacation rental properties can be listed under the same license as long as the legal owner is the same.

Peoria short-term rentals are subject to a 5.6% hotel/motel tax rate besides a 1.8% income tax on gross income.

Buying a vacation rental property in the City of Peoria is a workable and very profitable real estate investing strategy as non-owner occupied short-term rentals are fully legal and subject to minimal regulations.

Flagstaff Short Term Rental Laws

The City of Flagstaff defines a short-term rental as the rental of part or all of any legally permitted dwelling unit for less than 30 consecutive days, in line with the statewide definition.

Flagstaff vacation rental owners must get a TPT License from the Arizona Department of Revenue. Airbnb hosts need to pay a total city sales tax equivalent to 4.281% of gross income.

The Flagstaff short-term rental laws make this city one more excellent location for investing in Airbnb Arizona.

Takeaway

Real estate investors don’t need convincing to know that Arizona is one of the best places to invest in vacation rentals across the US. However, Arizona short-term rental laws are some of the most Airbnb friendly nationwide. Non-owner occupied Airbnb rentals are legal throughout Arizona and face very few regulations.

Thinking of buying an investment property in Arizona? Or already owning a rental property there that you want to convert into a vacation rental?

Connect with the Awning vacation rental management team to discuss the address, whether it qualifies for a short-term rental, and how to move forward.

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