Smith Bay, US Virgin Islands Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Smith Bay, US Virgin Islands?

Short-term rentals through booking platforms like Airbnb and VRBO have become increasingly popular in the US Virgin Islands, including in the Smith Bay area of St. Thomas. However, there are several important regulations that hosts need to be aware of before starting a short-term rental business.

Starting a Short-Term Rental Business in Smith Bay

To legally operate a short-term rental in Smith Bay and the US Virgin Islands, hosts must obtain the proper licenses and permits:

• For properties that can accommodate 5 or more guests, a "Short Term Rental A" license is required, which costs $260 per year.
• For properties that can accommodate up to 4 guests, a "Short Term Rental B" license is needed, costing $195 annually.
• The license application process involves a local police record check, zoning approval, and a fire inspection.
• Licenses must be renewed each year.

In addition to licensing, short-term rental operators in the USVI must collect a 12.5% room occupancy tax from guests and remit it to the government, unless bookings are made through platforms like Airbnb that collect and remit the tax automatically. Income from short-term rentals may also be subject to gross receipts and income taxes.

While there is no territory-wide law regulating short-term rentals, individual islands and districts can establish their own rules. For example, in 2024, a permit application was submitted for a 44-unit condo development in Smith Bay that would prohibit short-term rentals, with the developer stating the units would only be sold to Virgin Islanders as primary residences and not as vacation rentals. This suggests that some areas of Smith Bay may restrict short-term rentals in an effort to preserve housing for local residents.

Short-term rental hosts should also be aware of any restrictions imposed by their homeowners association, condo board, lease agreement, or insurance policy. Having adequate liability insurance is critical.

There are no requirements to join short-term rental associations, but groups like the US Virgin Islands Vacation Rental Owners and Managers association provide networking and educational resources for hosts.

Overall, operating a short-term rental in Smith Bay requires obtaining the proper licenses, paying applicable taxes, and complying with any local restrictions. Hosts should thoroughly research the regulations, permitting process, and insurance requirements before starting an Airbnb business. Online forums like BiggerPockets and the /r/VirginIslands subreddit can provide helpful firsthand experiences from other short-term rental operators in the area.

Short-Term Rental Licensing Requirements in Smith Bay

To legally operate a short-term rental in Smith Bay and the US Virgin Islands, hosts must obtain the proper business license from the Department of Licensing and Consumer Affairs (DLCA). The licensing requirements are as follows:

1. For properties that can accommodate 5 or more guests, a "Short Term Rental A" license is required. The annual fee is $260.
2. For properties that can accommodate up to 4 guests, a "Short Term Rental B" license is needed. The annual fee is $195.

The license application process involves submitting the following:

1. Completed application form
2. Local police record check
3. Zoning approval
4. Passing a fire inspection
5. Payment of the applicable license fee

Licenses must be renewed each year. As part of the renewal process, the DLCA will request a tax clearance from the Virgin Islands Bureau of Internal Revenue (VIBIR).

For the fire inspection, the inspector will require a copy of the first page and signature page of the deed or lease that proves ownership or right to possession of the rental property.

Failing to obtain the proper short-term rental license can result in fines and penalties. The DLCA has authority to issue citations and violation notices to any person engaging in unlicensed business activity in the US Virgin Islands.

To apply for the short-term rental license, hosts can contact the DLCA Licensing Division at:

1. (340) 713-3522 in St. Croix
2. (340) 714-3522 in St. Thomas and St. John

The typical processing time for short-term rental license applications in the US Virgin Islands is not specified. However, hosts should apply well in advance of when they plan to start renting, as the application requires a police background check, zoning approval, fire inspection and payment of the annual license fee before the license can be issued.

Required Documents for Smith Bay Short-Term Rentals

To obtain a short-term rental license in Smith Bay and the US Virgin Islands, hosts must submit the following documents to the Department of Licensing and Consumer Affairs (DLCA):

1. Completed Application Form: The short-term rental license application form can be obtained from the DLCA. It collects basic information about the rental property and the applicant.
2. Local Police Record Check: A background check from the local police department is required to ensure the applicant has no disqualifying criminal history. Contact the Virgin Islands Police Department to request this record check.
3. Zoning Approval: Proof that the rental property is located in an area zoned for short-term rentals. This approval confirms the property can be legally used as a short-term rental under local zoning laws. Contact the Division of Zoning in the Department of Planning and Natural Resources to obtain zoning approval.
4. Fire Inspection Report: A passing fire inspection report is needed to verify the rental unit meets fire safety standards. The fire inspector will require a copy of the deed or lease as proof of ownership or right to possession. Schedule the inspection with the Virgin Islands Fire Service.
5. Proof of Insurance: While not explicitly required in the DLCA licensing process, short-term rental hosts are strongly encouraged to have appropriate property and liability insurance coverage. Consult with an insurance agent to determine the right policy.
6. Deed or Lease: The fire inspector will require a copy of the first page and signature page of the property deed or lease to prove ownership or legal right to use the property as a short-term rental.
7. Payment of License Fee: The annual license fee is $260 for properties accommodating 5+ guests (Short-Term Rental A) or $195 for properties accommodating 1-4 guests (Short-Term Rental B). Payment is submitted to the DLCA along with the other required documents.

By gathering these required documents and submitting them to the Department of Licensing and Consumer Affairs, short-term rental hosts in Smith Bay can obtain the business license needed to legally operate under the US Virgin Islands' short-term rental regulations. The DLCA Licensing Division can be contacted at (340) 714-3522 in St. Thomas for any additional questions about the short-term rental license application process.

Smith Bay Short-Term Rental Taxes

Short-term rental operators in Smith Bay and the US Virgin Islands are subject to several taxes related to their rental income:

Hotel Room Tax (12.5%): Guests pay a hotel room tax of 12.5% of their gross room rate, which includes the base room rate plus any additional charges like energy surcharges or maintenance fees, but excludes charges for food, beverages, and gratuities. This tax is collected by the short-term rental host and remitted to the Virgin Islands Bureau of Internal Revenue (VIBIR) monthly using Form 722 V.I.

Gross Receipts Tax (5%): Short-term rental income received by the host may be subject to a gross receipts tax of 5%. However, there is generally an exemption for the first $9,000 of gross receipts per month. Hosts should file Form 720-B annually with the VIBIR to report their gross receipts.

Income Tax: Income received from short-term rentals may be subject to US Virgin Islands income tax. The exact rate will depend on the host's total taxable income and filing status. Consult a tax professional for details on income tax obligations.

It's important to note that the 12.5% Hotel Room Tax is collected from the guest and remitted by the host, while the 5% Gross Receipts Tax and any income taxes are the responsibility of the host to pay from their rental income.

Possible Deductions and Write-Offs

Short-term rental hosts in Smith Bay may be able to deduct certain expenses related to their rental business to reduce their taxable income:

1. Mortgage interest
2. Property taxes
3. Insurance
4. Utilities
5. Repairs and maintenance
6. Depreciation of the rental property
7. Supplies and linens
8. Cleaning fees and property management fees
9. Advertising and platform fees (like Airbnb or VRBO)

Hosts should keep detailed records of all rental-related income and expenses, and consult with a tax professional to determine which deductions they are eligible to claim on their tax returns. Properly tracking expenses and claiming allowable deductions can help reduce the overall tax burden for short-term rental operators.

US Virgin Islands Wide Short-Term Rental Rules

While there is no territory-wide law regulating short-term rentals in the US Virgin Islands, there are several requirements that apply to hosts in Smith Bay and across the territory:

Business License: Effective July 1, 2021, the Department of Licensing and Consumer Affairs (DLCA) requires short-term rental operators to obtain a specific business license. There are two license categories:

1. "Short Term Rental A" for properties accommodating 5 or more guests, with an annual fee of $260.
2. "Short Term Rental B" for properties accommodating up to 4 guests, with an annual fee of $195.

Hotel Room Occupancy Tax (12.5%): Guests must pay a hotel room tax of 12.5% of the gross rental rate, which the host is responsible for collecting and remitting to the Virgin Islands Bureau of Internal Revenue (VIBIR) monthly, unless the booking is made through a platform like Airbnb that collects and remits the tax on the host's behalf.

Gross Receipts Tax (5%): Short-term rental income may be subject to a gross receipts tax of 5%, with an exemption for the first $9,000 of gross receipts per month. Hosts should file Form 720-B annually with the VIBIR to report gross receipts.

Income Tax: Rental income may also be subject to US Virgin Islands income tax, with the rate depending on the host's total taxable income and filing status.

Zoning and HOA Rules: While there is no territory-wide zoning law specific to short-term rentals, hosts must comply with any zoning regulations and Homeowner Association (HOA) rules in their local area. Some HOAs may permit long-term rentals but restrict short-term rentals.

Health and Safety Standards: Hosts may be subject to health and safety standards and noise restrictions as part of the licensing and registration process.

Although not legally required, hosts in Smith Bay and across the US Virgin Islands can join short-term rental associations like the US Virgin Islands Vacation Rental Owners and Managers for additional support and resources.

It's important for hosts to be aware of and comply with these territory-wide requirements, as well as any island-specific regulations, to legally operate a short-term rental business in Smith Bay and the US Virgin Islands. Failure to obtain proper licensing can result in fines and penalties from the DLCA.

Does Smith Bay Strictly Enforce STR Rules?

Based on discussions in online forums like BiggerPockets and Reddit, it appears that enforcement of short-term rental regulations in Smith Bay and the US Virgin Islands is somewhat lax compared to other destinations. Many hosts report operating STRs in the area without major issues, despite not being fully compliant with licensing and tax requirements.

One BiggerPockets user shared their experience owning a short-term rental condo in the US Virgin Islands, noting that while there are regulations on the books, enforcement is not very strict in practice. They mentioned that the island has not seen a new condo development since the 1970s due to the difficult business environment, which could contribute to more relaxed enforcement of STR rules as the government aims to promote tourism.

On the /r/VirginIslands subreddit, several threads discuss the short-term rental landscape in the USVI. The general consensus among Redditors is that the islands are relatively Airbnb-friendly, with many hosts operating without the newly required business license. However, some users caution that the government has signaled increasing enforcement, so operating under the radar may become riskier.

Despite the apparent leniency in enforcement, it's important to note that the USVI government has taken steps to regulate the STR industry in recent years. In 2021, the Department of Licensing and Consumer Affairs (DLCA) introduced specific business licenses for short-term rentals, and the territory has an agreement with Airbnb to collect the 12.5% Hotel Room Occupancy Tax on behalf of hosts.

While some hosts may continue to operate without full compliance, doing so carries risks. The DLCA has the authority to issue fines and citations for unlicensed short-term rental activity. As the industry grows and the government seeks to capture more tax revenue, enforcement efforts could increase.

In summary, while Smith Bay and the US Virgin Islands may be somewhat more lax in enforcing short-term rental regulations compared to other destinations, hosts should not assume they can operate under the radar indefinitely. The safest approach is to obtain the required business license, comply with tax obligations, and follow all applicable rules to avoid potential penalties down the line. The STR landscape in the USVI is evolving, and hosts should stay informed about any changes in enforcement practices.

How to Start a Short-Term Rental Business in Smith Bay

Starting a short-term rental business in Smith Bay, US Virgin Islands involves several key steps to ensure compliance with local regulations and set yourself up for success. Here's a step-by-step guide:

1. Research local regulations: Familiarize yourself with the short-term rental regulations in Smith Bay and the US Virgin Islands. As of July 1, 2021, the Department of Licensing and Consumer Affairs (DLCA) requires a specific business license for STRs. Understand the requirements for the "Short Term Rental A" license (5+ guests, $260 annually) or "Short Term Rental B" license (1-4 guests, $195 annually).
2. Check zoning and HOA rules: Verify that your property is located in an area zoned for short-term rentals. Contact the Division of Zoning in the Department of Planning and Natural Resources for approval. If your property is part of a Homeowners Association (HOA), review their rules regarding STRs.
3. Create a business plan: Develop a comprehensive business plan that outlines your strategy, target market, pricing, expenses, and growth plans. This will guide your decision-making and help secure funding if needed.
4. Register your business: Register your short-term rental business with the US Virgin Islands government. Depending on your business structure, this may involve the Department of Licensing and Consumer Affairs, Department of Planning and Natural Resources, or the Division of Corporations and Trademarks.
5. Obtain necessary licenses and permits: Apply for the appropriate short-term rental license (A or B) from the DLCA. The process involves submitting a completed application, local police record check, zoning approval, passing a fire inspection, and paying the annual license fee. Renew your license each year.
6. Prepare your property: Ensure your rental property is clean, well-maintained, and equipped with necessary amenities. Consider the needs of your target market when furnishing and decorating. Invest in high-quality photos for your listings.
7. Set up online listings: Create listings on popular vacation rental platforms like Airbnb and VRBO. Craft compelling descriptions, use attractive photos, and set competitive rates. Consider creating your own website and utilizing social media for marketing.
8. Automate your operations: Implement vacation rental software to streamline tasks like booking management, guest communication, cleaning, and maintenance. Automation can save time and improve the guest experience.
9. Comply with tax obligations: Collect the 12.5% Hotel Room Occupancy Tax from guests and remit it to the Virgin Islands Bureau of Internal Revenue (VIBIR) monthly, unless your booking platform collects and remits it for you. File gross receipts and income taxes as required.
10. Provide excellent guest service: Prioritize guest satisfaction by maintaining a clean and well-equipped property, responding promptly to inquiries, and addressing any issues that arise during their stay. Encourage guests to leave reviews to attract future bookings.

By following these steps and staying informed about any changes in local regulations, you can successfully launch and operate a short-term rental business in Smith Bay. While enforcement of STR rules may be somewhat lax compared to other destinations, it's essential to comply with all legal requirements to avoid potential fines and penalties.

Who to Contact in Smith Bay about Short-Term Rental Regulations and Zoning?

For questions about short-term rental regulations and licensing in Smith Bay and the US Virgin Islands, contact the Department of Licensing and Consumer Affairs (DLCA):

1. St. Thomas office: (340) 714-3522
2. Address: Property & Procurement Building, 8201 Sub Base, Suite 1, St. Thomas, VI 00802
3. Website: https://dlca.vi.gov

The DLCA's Licensing Division handles the short-term rental business license application process. They can provide information on the "Short Term Rental A" and "Short Term Rental B" license requirements, fees, and renewal process.

For zoning approval, which is required as part of the short-term rental license application, contact the Division of Zoning in the Department of Planning and Natural Resources:

• Phone: (340) 774-3320
• Website: https://dpnr.vi.gov/environmental-protection/division-of-comprehensive-and-coastal-zone-planning/

If your rental property is located within the Point Pleasant Villa Owners Association (PPVOA), review their rules and regulations regarding short-term rentals. Contact the PPVOA for any questions:

• Phone: (340) 714-7900
• Email: ppvoa@pointpleasantresort.com
• Website: https://www.pointpleasantvoa.com

Smith Bay short-term rental hosts may find the following online communities and resources helpful for connecting with other hosts, staying informed about regulations, and getting advice:

• BiggerPockets US Virgin Islands Forum: https://www.biggerpockets.com/forums/530-us-virgin-islands
• /r/VirginIslands subreddit: https://www.reddit.com/r/VirginIslands/
• US Virgin Islands Vacation Rental Owners and Managers Facebook group: https://www.facebook.com/groups/usvivroms/

By contacting the appropriate government agencies and reviewing applicable HOA rules, short-term rental hosts in Smith Bay can ensure they are operating in compliance with local regulations. Engaging with online communities of fellow hosts can provide valuable insights and support as you navigate the short-term rental landscape in the US Virgin Islands.

What Do Airbnb Hosts in Smith Bay on Reddit and Bigger Pockets Think about Local Regulations?

Based on discussions in online forums like Reddit and BiggerPockets, short-term rental hosts in Smith Bay and the US Virgin Islands have mixed feelings about local regulations:

In a thread on the /r/AirBnB subreddit, a host shared their experience operating a short-term rental condo in the US Virgin Islands. They noted that while there are regulations on the books, enforcement is not very strict in practice. The host mentioned that the island has not seen a new condo development since the 1970s due to the difficult business environment, which could contribute to more relaxed enforcement of STR rules as the government aims to promote tourism.

On the BiggerPockets forums, a real estate investor inquired about managing Airbnb and VRBO properties remotely in the US Virgin Islands. Respondents advised the investor to thoroughly research local regulations, zoning laws, and HOA rules before purchasing a property to use as a short-term rental. They emphasized the importance of having a reliable local property manager to handle day-to-day operations and ensure compliance with any applicable rules.

Another BiggerPockets user shared their experience forming an LLC for their vacation rental property in the US Virgin Islands. They sought advice on using a Florida mailing address for the LLC while meeting the requirement of having a registered agent residing in the USVI. This highlights the complexity of navigating business regulations as an out-of-territory owner.

In a post on the /r/AirBnB subreddit, a guest recounted their negative experience with a host in St. Croix who withheld a $2,000 security deposit based on false accusations of theft and damage. While not directly related to regulations, this story underscores the importance of hosts understanding their legal obligations and following proper procedures to avoid disputes.

Overall, while there are some concerns about the regulatory environment for short-term rentals in Smith Bay and the US Virgin Islands, hosts on Reddit and BiggerPockets seem to view the area as relatively friendly to Airbnb and VRBO operators compared to other markets. However, they caution new investors to do their due diligence on local rules and secure reliable local support to ensure compliance and smooth operations.

Disclaimer: While we here at BNBCalc strive to keep all of our city regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each city and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.