Vacation Rentals are Subject to Sales & Lodging Taxes

Our community has an increasing number of homes used as short-term rental properties. With the exception of structures classified as accessory dwelling units (ADUs), this is generally an allowable use of residential properties under the municipal code. However, any rental of short-term lodging units is taxable and the owners must collect and remit sales and lodging taxes. This includes hotels, motels, bed-and-breakfast inns, condominiums, campsites, and time shares of any lodging unit.

The City has an occupation tax on lodging of $2.50 per room per night. This is a tax on the business owner; however, most lodgers choose to pass this tax on to the renter. In that case, it becomes part of the revenue subject to sales and lodging taxes, consisting of a total 7.9% sales tax (state, county and city rates combined) and the 1.9% Chaffee County lodging tax.

Lodgers must register with the City and with the State of Colorado. For more information and applicable tax forms, see the websites for the City of Salida and Colorado Department of Revenue. The staff at City Hall would also be happy to answer questions.

Our “Doing Business in Salida” page addresses needed registrations and licenses, zoning considerations, utility code changes of use, fire inspection requirements and links to local resources. See http://cityofsalida.com/business/

The Colorado Department of Revenue publication “FYI Sales 11, Sales Taxes Due on Unit Rentals of Hotels, Motels, Bed-and-Breakfasts, Condominiums, & Time-Shares” is very helpful. This publication is located at www.TaxColorado.com.

The City collected $88,425 year-to-date and $217,213 for the year ended December 31, 2014 from the occupation tax. The proceeds of this tax are used for capital improvements and operations expenses for parks and recreation and arts facilities in the City, including the Aquatic Center and the SteamPlant Event Center. Since inception, the majority of annual revenue has been used for capital purchases or improvements at the pool and other recreation areas. These are detailed on the city website in a report called, “Capital Investments by Year.” The remainder of this revenue source pays a portion of the operating costs for the Aquatic Center.

The vast majority of the City’s lodging tax revenue is from the hotels and motels. Currently, 80 vacation units are paying the lodging tax. A recent review of internet sites for Salida vacation listed 129 on airbnb, 136 on VRBO and 23 on Flipkey. Craigslist likely had more than usual due to the GOTR stopover. Some are not inside city limits.

The City relies on staff to watch for properties that may be improperly classified as residential properties that are, in fact, being used as short-term rentals. To assist with monitoring tax compliance, we also contract with Revenue Recovery Group to audit lodgers.

Safety issues can also be a concern when issues arise with absentee homeowners, whether the property is used as a rental or the property owners’ vacation home. It is important that the City have contact information in the event emergency services personnel are called to the property.

As recent studies and newspaper articles have highlighted, the fabric of our small town neighborhoods change with a preponderance of non-residents. While the City does have regulations to address this, it is a discussion that community members and City leaders may want to examine.