The Tennessee lodging tax is not a single charge but a stack: the 7% state sales tax, a local sales tax of up to 2.75%, and a separate local occupancy tax set by the city or county. Depending on where the property sits, the total tax on a hotel room or short-term rental can exceed 15%, and in some high-rate areas more than 17%. The rules apply to hotels, motels, inns, and short-term rentals like Airbnb and VRBO listings, and who actually collects and remits the tax depends on how the guest booked the stay.
The Three Tax Layers
Tennessee applies its standard 7% state sales tax to charges for rooms, lodgings, or accommodations.1FindLaw. Tennessee Code 67-6-202 On top of that, most cities and counties add a local option sales tax, which can be as high as 2.75% and is set in 0.25% increments.2Tennessee Department of Revenue. Local Sales Tax Combined, the sales tax portion alone commonly runs between 9% and 9.75%.
The third layer is the local hotel/motel occupancy tax, a separate charge that has nothing to do with the sales tax. Under general state law, municipalities may impose an occupancy tax of up to 4%, and non-metropolitan counties may do the same. Metropolitan governments follow a different authorization, generally capped at 3%, with an additional 3% permitted for smaller metropolitan counties under 25,000 in population.3University of Tennessee County Technical Assistance Service. Hotel/Motel Tax Some jurisdictions have historically been authorized to charge more through private acts of the General Assembly.
A change took effect in 2025. No municipality may raise its occupancy tax if the increase would push the combined county-plus-city occupancy rate above 8% in an incorporated area. Rates already authorized before May 1, 2025, remain in place even where they exceed that threshold.4Tennessee General Assembly. HB 627 – SB 629 Fiscal Memorandum The cap governs occupancy tax only; the sales tax layers are unaffected.
What Charges Are Taxable
Sales tax and occupancy tax apply to the full amount the guest pays, not just the base nightly rate. Cleaning fees, pet fees, resort amenity charges, and any other mandatory add-on are taxable when they are part of the price of occupying the room.5FindLaw. Tennessee Code 67-6-205 The local occupancy tax works the same way, reaching the “consideration charged by the operator.” If the guest has to pay it to stay, calculate tax on it.
Who Collects the Tax
The collection duty in Tennessee splits three ways depending on how the guest books.
Direct Bookings
A hotel, motel, inn, or other lodging operator that accepts a guest directly collects both the sales tax and the local occupancy tax at the time of payment. The operator remits sales tax to the Tennessee Department of Revenue. Occupancy tax goes either to the local government or, in certain cases, to the Department of Revenue for distribution.
Airbnb, VRBO, and Other Marketplace Facilitators
Platforms like Airbnb and VRBO qualify as marketplace facilitators, meaning they contract with sellers to facilitate sales and also collect payment from the buyer.6FindLaw. Tennessee Code 67-6-102 When the platform handles the booking and its Tennessee sales exceed $100,000 in the prior twelve months, the platform is liable for collecting and remitting sales tax on the transaction.7Justia. Tennessee Code 67-6-501 – Tax Collected From Dealer A host whose bookings all run through a qualifying platform does not separately collect or remit sales tax on those stays.
Short-term rental marketplaces must also collect the local occupancy tax on stays of fewer than 30 continuous days, remit it to the Department of Revenue, and the Department distributes the money to the appropriate county.8Tennessee Department of Revenue. Taxation of Short-Term Rental Units This has been in place since January 1, 2021. The Department administers occupancy tax collection this way only for marketplace bookings; direct bookings still go through the local government.
Property Management Companies
If an owner uses a property management company to run a vacation rental, the management company collects and remits the sales tax on those rentals.7Justia. Tennessee Code 67-6-501 – Tax Collected From Dealer Confirm in writing which taxes the manager will handle, and check that returns are actually being filed. An owner who assumes the manager is taking care of everything can be left owing the tax if it isn’t.
Registering With the Department of Revenue
Before collecting any lodging tax, register with the Department of Revenue through the Tennessee Taxpayer Access Point (TNTAP). Operating without the required license is prohibited.9Tennessee Department of Revenue. Registration and Licensing TNTAP is the state’s online portal for tax accounts, filings, and payments.10Tennessee Department of Revenue. Tennessee Taxpayer Access Point
Have the following ready when you apply:
- Federal Employer Identification Number or Social Security Number for the owning entity or individual.
- Legal business name and the physical address where lodging is provided.
- The date you first offered the property for rental.
- Your business classification, so the account is set up for the correct tax types.
TNTAP issues digital confirmation and, in time, assigns a tax identification number. You cannot file returns or remit tax until that number is issued, so register well before your first booking.
Filing and Payment Deadlines
Sales tax returns are filed monthly, quarterly, or annually, and most lodging businesses file monthly. Monthly returns are due by the 20th of the following month. Quarterly returns are due January 20, April 20, July 20, and October 20. Annual returns are due January 20.11Tennessee Department of Revenue. Due Dates and Tax Rates Returns and payments are submitted electronically through TNTAP, which generates a confirmation number as your receipt. If you have a local occupancy tax obligation that isn’t handled by a marketplace, check with your county or municipality for its own filing schedule.
Penalties and Interest for Late Filing
A late return triggers an automatic penalty of 5% of the unpaid tax for each month or partial month it stays delinquent, up to 25%. Even a return with no tax due carries a minimum penalty of $15 when it is filed late.12Justia. Tennessee Code 67-1-804 – Delinquency – Dishonor of Check The penalty runs from the original due date.
Interest runs on top of the penalty. For the state fiscal year July 1, 2025, through June 30, 2026, the rate on unpaid balances is 11.50%. Balances under an installment agreement accrue at 13.25%.13Tennessee Department of Revenue. Tax Rates and Interest Rate Filing a zero-dollar return on time costs nothing. Filing late when you owe money costs 5% per month plus interest from day one.
Records You Have to Keep
Tennessee requires lodging operators to keep records for three years from December 31 of the year the return was filed.14FindLaw. Tennessee Code 67-6-523 That means invoices, sales receipts, bank statements, exemption certificates from tax-exempt guests, and copies of filed returns.15Tennessee Department of Revenue. Sales and Use Tax Record-keeping Requirements If you are audited and the assessment is appealed, keep the records until the appeal is fully resolved. In fraud cases or where the operator never registered, the state can reach back further than three years.
Exemptions
Not every stay is taxable, and the thresholds differ by tax.
The 90-Day Rule for Long Stays
State sales tax on lodging stops applying when the same guest stays 90 or more continuous days. At that point, you stop charging both the 7% state sales tax and the local sales tax on the room.5FindLaw. Tennessee Code 67-6-205 The local occupancy tax uses a shorter threshold, typically reaching only stays of 30 consecutive days or fewer.16Tennessee Department of Revenue. LOT-2 – Local Occupancy Tax Overview A guest staying 31 days may owe state sales tax but not the local occupancy tax; one staying 90 days or more may owe neither. Document continuous occupancy in case the exemption is questioned during an audit.
Government Guests
Sales to Tennessee state government and its counties and municipalities are exempt.17Justia. Tennessee Code 67-6-329 – Miscellaneous Exemptions Federal government stays split on the payment method. A charge on a centrally billed federal government account is exempt from Tennessee state sales tax. A charge on an individually billed account that the employee will submit for reimbursement is not exempt.18GSA SmartPay. Tennessee Tax Information Verify the payment method and get a government exemption certificate at check-in before waiving any tax.
Nonprofits
Tennessee does not give a broad lodging tax exemption to nonprofit organizations just because they hold 501(c)(3) status. Some nonprofits qualify for sales tax exemptions on their own purchases through an exemption certificate issued by the Department of Revenue, but the availability of that exemption for hotel stays specifically is not clearly established in the published guidance. If a nonprofit guest claims an exemption, ask for the organization’s Tennessee exemption certificate and keep a copy with your records.