What do I need to know about Short term Vacation Rentals on Bainbridge Island?

State & City Business Licenses, State & City Business & Occupation Tax (B&O), Lodging Taxes, and Primary Liability Insurance are all required for short term rentals on Bainbridge Island.

What is the difference between a long-term or short-term rental?

Short term rentals are residential rental agreements lasting less than 30 days at a time, while long term rentals last 30 days or more.  Short-term rentals are commonly associated with rentals hosted on AirBnb and VRBO, but they are not limited to online rental platforms.   

I am the property owner and I have a short term rental – what do I need to be compliant with the City and State?

The Property Owner needs six things for short term rental compliance:

1. Obtain an annual State Business License
   1. Use NAICS Code 721199 – All Other Traveler Accommodation
2. Obtain an annual City of Bainbridge Business License and post it on your rental listing
   1. Use NAICS Code 721199 – All Other Traveler Accommodation
3. File an annual Business & Occupation (B&O) Tax Return with the State
   1. May be offered through the rental platform
4. File an annual Business & Occupation (B&O) Tax Return with the City
   1. May be offered through the rental platform
5. File monthly Lodging Taxes with the State of Washington
   1. May be offered through the rental platform
6. Maintain primary liability insurance (minimum $1 Million) to cover the short term rental unit
   1. May be offered through the rental platform

I am the property owner, but I use a property management company (e.g. Vacasa) to manage my rental.   Who needs to get a business license: myself, the property manager, or both?

Both.  Property owners (i.e. Operators) and Property Managers/Management Companies (Managers) are required to obtain a City Business License before renting all or a portion of a home on Bainbridge Island, as it is considered “engaging in business” per BIMC 5.05.030.  This applies to both long and short-term rentals.  Rental platforms, such as AirBnb or VRBO, have different laws governing their business with the State.

What code should I use when applying for my business license? 

When applying for a State/City Business License, you will be asked to enter the type of business as it fits within the North American Industry Classification System (NAICS).  The correct NAICS code for a short term rental is 72119 Other Traveler Accommodation
 
72 Accommodation and Food Services → 7211 Traveler Accommodation → 72119 Other Traveler Accommodation

Aren’t Business & Occupancy taxes and Lodging taxes the same thing?

No. The City B&O tax is a separate tax from the housing and vacation rental taxes instituted by the State of Washington.  It is the property owner’s responsibility to ensure the City B&O Tax Report and Lodging Taxes are filled annually. Discuss with your property manager and/or rental platform to confirm whether they’ll complete this tax reporting on your behalf as part of their service.

What is the City Business & Occupancy (B&O) Tax?

The City’s B&O Tax is a tax that is measured on the value of products, gross proceeds of sales, or gross business income in the City.   This is considered a ‘gross receipts tax’, and therefore there are no deductions for labor, materials, or other costs of doing business.  Businesses with a gross revenue of more than $150,000 are subject to the City B&O tax of 1/10^th of 1% (0.001).

If the gross revenue of my short term rental is less than $150,000, do I need to file a City B&O tax return?

Yes, you still need to file a City B&O tax return, but you will owe no tax.

What is the Lodging Tax? (and what is it used for?)

The Lodging Tax (also called Hotel-Motel Tax) is a sales tax on all lodging accommodation charges for stays lasting less than 30 days (e.g. hotels, motels, inns, bed & breakfasts, RV parks, and short term rentals).  The Lodging Tax on Bainbridge Island is 4% of the total lodging bill.  These funds collected by the property owner (or manager), paid to the State monthly or quarterly, and then distributed to the City by the State. The City, through its Lodging Tax Advisory Committee (LTAC), awards contracts to vendors promoting tourism in the City. They can also be used to repaying bonds issued for affordable housing.

Where can I learn more about Washington State regulations regarding short term rentals?

Washington State Legislature RCW 64.37

https://mrsc.org/explore-topics/finance/revenues/lodging-tax

https://dor.wa.gov/open-business/apply-business-license