Arizona Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Arizona?

Arizona has become a popular destination for short-term rentals, with platforms like Airbnb and VRBO offering a wide range of accommodations for travelers. However, operating a short-term rental in Arizona comes with its own set of regulations and requirements. In this article, we'll explore the specific rules and guidelines for starting and managing a short-term rental business in Arizona.

Starting a Short-Term Rental Business in Arizona

To start a short-term rental business in Phoenix, prospective hosts are required to obtain a formal registration and license from the City of Phoenix. This process involves submitting an application and following the outlined steps on the MyPHX311 website. Additionally, hosts must register their rental property with Maricopa County to comply with Arizona state law.

Approximately 50,000 active Airbnb and Vrbo listings exist in Arizona, likely representing 90%-95% of the state's short-term rentals. This figure has risen significantly from about 30,000 listings in 2019. The surge in short-term rental demand, fueled by the pandemic, led to thousands of new properties entering the market to meet the demand.

The State of Arizona does not apply state-level licenses or permits to vacation rentals. While Article 9 of the Arizona Statutes prevents Arizona cities and towns from prohibiting short-term rentals, it allows them to require owners to obtain and maintain a local regulatory permit. As a result, most Arizona cities demand a vacation rental license or permit from STR owners.

In most cases, the requirements are very similar in different locations as owners need to provide basic information about the property, themselves, any owner's designees, and an emergency point of contact. Approvals or denials are typically given within 7 days of applying.

The City of Scottsdale regulates short-term rentals in Ordinance 4566, incorporated under Article IX of the City Code of Ordinances. Scottsdale generally defines vacation rentals as residential properties offered for rent for less than 30 days. They are allowed in apartments, condominiums, townhomes, and single-family neighborhoods as long as they are not prohibited in a private agreement8. Guest rooms and guest houses cannot be rented independently of the main house; they have to be rented together with the main house.

Scottsdale Airbnb hosts need to get a vacation rental license issued from the City. License applications require various documents and information, such as a TPT license, business registration, personal ID, and more.

In conclusion, starting a short-term rental business in Arizona requires careful consideration of the local regulations and requirements. While the state has relatively lenient laws regarding short-term rentals, cities like Phoenix and Scottsdale have implemented their own ordinances to ensure the safety and well-being of both hosts and guests. By obtaining the necessary licenses, permits, and insurance, and adhering to the specific rules set forth by each city, short-term rental hosts can successfully operate their businesses in Arizona's thriving tourism market.

Short-Term Rental Licensing Requirement in Arizona

While the State of Arizona does not impose any state-level licenses or permits for short-term rentals, it allows cities and towns to require owners to obtain and maintain a local regulatory permit. As a result, most Arizona cities demand a vacation rental license or permit from STR owners.

In most cases, the requirements are very similar across different locations. Owners need to provide basic information about the property, themselves, any owner's designees, and an emergency point of contact. Approvals or denials are typically given within 7 days of applying.

To obtain the necessary licenses and permits, Arizona vacation rental owners must submit the following:

• TPT license issued by the Arizona Department of Revenue
• Business registration
• Local regulatory license or permit
• Federal Employer Identification Number (EIN)
• Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
• County or city short-term rental license or permit
• Personal identification
• Certain statements based on templates
• Notification to neighboring properties about operating an Airbnb business
• Proof of payment of fees

There might be slight variations in the documentation required by each Arizona city, so owners need to check local regulations. In most cases, preparing the necessary documents takes very little time.

Obtaining a state TPT license and a local regulatory permit typically requires an annual fee of a few hundred dollars1. Airbnb hosts are also required to have general liability insurance of at least $500,000, unless it is provided by the vacation rental listing platform.

Failure to obtain the required licenses and permits can result in penalties and fines. For example, in the City of Chandler, operating a short-term rental without a license is subject to civil penalties of up to $1,000 per month if the owner fails to apply for a license within 30 days of receiving a written notice of violation from the city.

To submit the required documents and obtain the necessary licenses and permits, short-term rental owners should visit their local city or county website and follow the outlined application process. In Phoenix, for instance, prospective hosts must submit an application and follow the steps on the MyPHX311 website. The approval process normally takes about 7 business days once a completed application has been submitted.

In conclusion, while Arizona does not have statewide short-term rental licensing requirements, most cities and towns in the state do require owners to obtain a local permit or license. The specific requirements and fees may vary slightly by location, but generally involve submitting basic information about the property and owner, along with proof of insurance and payment of applicable fees. Failing to comply with these regulations can result in significant penalties, so it's crucial for Arizona short-term rental owners to familiarize themselves with their local requirements and obtain the necessary licenses before beginning to operate.

Required Documents for Arizona Short-Term Rentals

To operate a short-term rental in Arizona, owners must obtain and submit several key documents to ensure compliance with state and local regulations. While specific requirements may vary slightly by city or county, the following documents are generally required at the state level:

1. Transaction Privilege Tax (TPT) License: All short-term rental owners in Arizona must obtain a TPT license from the Arizona Department of Revenue (ADOR) to legally collect and remit sales taxes on their rental income. The application process can be completed online through the ADOR website.
2. Business Registration: Short-term rental owners must register their business with the Arizona Corporation Commission (ACC) or the Arizona Secretary of State, depending on their business structure. This process can be completed online through the ACC's eCorp system or the Secretary of State's website.
3. Federal Employer Identification Number (EIN): If the short-term rental is operated under a business entity, such as an LLC or corporation, the owner must obtain an EIN from the Internal Revenue Service (IRS). This can be done online through the IRS website.
4. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN): For individual owners or sole proprietors, an SSN or ITIN is required for tax purposes. These numbers are issued by the Social Security Administration and the IRS, respectively.
5. Personal Identification: Owners must provide a valid form of personal identification, such as a driver's license or passport, to verify their identity when applying for licenses and permits.
6. Proof of Liability Insurance: Arizona law requires short-term rental owners to maintain a minimum of $500,000 in liability insurance coverage, unless the listing platform provides equal or greater coverage. Proof of insurance must be submitted to the relevant authorities upon request.
7. Neighbor Notification: Some Arizona cities, such as Scottsdale and Tempe, require short-term rental owners to notify neighboring properties of their intention to operate a rental5. This notification must be sent by certified mail and include specific information about the rental property and owner.

While these documents are required at the state level, it's essential for short-term rental owners to check with their local city or county for any additional requirements, such as local licenses or permits, zoning compliance, or safety inspections. By obtaining and maintaining these necessary documents, Arizona short-term rental owners can ensure they are operating legally and responsibly within the state's regulatory framework.

Arizona Short-Term Rental Taxes

Short-term rental owners in Arizona are subject to several types of taxes at the state and local levels. Understanding these taxes is crucial for compliance and maximizing profitability. The main taxes that apply to Arizona short-term rentals include:

Transaction Privilege Tax (TPT): The TPT is Arizona's equivalent of a sales tax, and it applies to the gross receipts of short-term rental businesses. The state TPT rate is 5.6%, but counties and cities may impose additional rates, resulting in a combined rate that can exceed 15% in some locations.

County Excise Tax: In addition to the state TPT, counties in Arizona may impose an excise tax on short-term rentals. This tax is usually levied at a rate of 10% of the state TPT.

Local Transient Occupancy Tax (TOT): Some Arizona cities collect a transient occupancy tax, also known as a transient lodging tax, on short-term rentals. The TOT rate varies by city, typically ranging from 2% to 5.5%.

Rental Income Tax: Short-term rental owners must pay federal and state income taxes on their rental revenue. The applicable tax rates depend on the owner's overall income and filing status.

Property Tax: Arizona short-term rental owners are also responsible for paying state and municipal property taxes on their rental properties.

It's important to note that while the state TPT rate is 5.6%, the combined rate of all state, county, and city taxes can exceed 15% in some locations. Short-term rental owners should carefully research the specific tax rates and requirements in their area to ensure compliance.

Deductions and Write-Offs

To help offset the tax burden, Arizona short-term rental owners can deduct various business-related expenses from their taxable income. These deductions may include:

1. Mortgage interest
2. Mortgage premium insurance
3. Property taxes and other taxes
4. Depreciation
5. Rental property maintenance and repairs
6. Utilities
7. Supplies provided to guests
8. Fees related to cleaning, accounting, legal services, and other business operations
9. Travel expenses incurred while managing the property
10. Home office expenses

To qualify for these deductions, short-term rental owners must rent out their properties for at least 14 days per calendar year and occupy the property for no more than 14 days per calendar year. Keeping accurate records of all business-related expenses is essential for maximizing deductions and minimizing tax liability.

In summary, Arizona short-term rental owners are subject to various state and local taxes, including the TPT, county excise tax, TOT, rental income tax, and property tax. The combined tax rate can be substantial, but owners can offset some of these costs by taking advantage of available deductions for business-related expenses. Understanding and complying with Arizona's short-term rental tax requirements is crucial for the success and longevity of any vacation rental business in the state.

Does Arizona Strictly Enforce STR Rules?

Arizona is generally considered to be a short-term rental friendly state, especially when compared to other states and cities with more restrictive regulations. In 2016, Arizona passed a law (SB 1350) that effectively prohibited cities and towns from banning short-term rentals, making it one of the most Airbnb-friendly states in the country.

However, this law has faced criticism from some local governments and residents who argue that it has led to an influx of investors buying up properties for short-term rentals, reducing housing availability and affordability for long-term residents. In response to these concerns, the Arizona Legislature passed SB 1168 in 2022, which allows cities and towns to create a limited permit/license process to further regulate short-term rentals.

Despite these regulatory changes, many hosts continue to operate short-term rentals in Arizona, often with great success. According to data from AirDNA, there are approximately 50,000 active Airbnb and Vrbo listings in Arizona, representing a significant increase from around 30,000 listings in 2019.

On platforms like Bigger Pockets and Reddit, many short-term rental hosts share positive experiences operating in Arizona. They cite the state's strong tourism industry, relatively low property taxes, and business-friendly environment as key factors in their success. However, some hosts also acknowledge the importance of complying with local regulations and obtaining the necessary licenses and permits to avoid potential fines and penalties.

While Arizona cities and towns now have more authority to regulate short-term rentals, enforcement of these rules can vary depending on the location and available resources. Some cities, like Scottsdale and Tempe, have been more proactive in monitoring and enforcing short-term rental regulations, while others may take a more hands-off approach.

In conclusion, Arizona remains one of the most Airbnb-friendly states in the country, despite recent regulatory changes that allow for greater local control over short-term rentals. Many hosts continue to operate successfully in Arizona, taking advantage of the state's strong tourism industry and relatively lenient regulations. However, it is crucial for hosts to familiarize themselves with and comply with local requirements to avoid potential penalties and ensure the long-term viability of their short-term rental businesses.

How to Start a Short-Term Rental Business in Arizona

Starting a short-term rental business in Arizona can be a lucrative venture, but it requires careful planning and execution. Follow these steps to successfully launch your Arizona short-term rental business:

1. Research local regulations: Before investing in a property, thoroughly research the short-term rental regulations in the city or town where you plan to operate. Familiarize yourself with zoning laws, licensing requirements, and any restrictions on the number of guests or length of stays.
2. Choose a property: Select a property that meets your investment goals and local regulatory requirements. Consider factors such as location, amenities, and potential rental income. Conduct a thorough market analysis to ensure the property has strong short-term rental potential.
3. Register your business: Register your short-term rental business with the Arizona Corporation Commission or the Arizona Secretary of State, depending on your chosen business structure (e.g., LLC, sole proprietorship). Obtain a Federal Employer Identification Number (EIN) from the IRS if required.
4. Obtain necessary licenses and permits: Apply for a Transaction Privilege Tax (TPT) license from the Arizona Department of Revenue. Obtain any required local licenses or permits, such as a short-term rental permit or a business license, from your city or county.
5. Set up your rental property: Furnish and equip your rental property to create an inviting and comfortable space for guests. Invest in high-quality furniture, linens, and amenities to attract positive reviews and repeat bookings.
6. Establish house rules and rental agreements: Create clear house rules and rental agreements that outline expectations for guests, such as occupancy limits, noise restrictions, and pet policies. Consult with a legal professional to ensure your agreements comply with Arizona law.
7. List your property on short-term rental platforms: Create listings for your property on popular short-term rental platforms like Airbnb and Vrbo. Use high-quality photos, detailed descriptions, and competitive pricing to attract bookings.
8. Manage your bookings and guests: Establish a system for managing bookings, communicating with guests, and coordinating cleaning and maintenance. Consider hiring a professional property management company if you prefer a hands-off approach.
9. Comply with tax obligations: Register with the appropriate state and local tax authorities, and collect and remit all required taxes, including state and local TPT, county excise tax, and transient occupancy tax.
10. Continuously improve and adapt: Monitor your short-term rental's performance and guest feedback regularly. Make necessary improvements to your property and adjust your pricing and marketing strategies to optimize occupancy and revenue.

Tips for success:

1. Prioritize guest experience by providing excellent communication, clean and well-maintained accommodations, and thoughtful amenities.
2. Invest in professional photography to showcase your property's best features and attract more bookings.
3. Utilize dynamic pricing tools to optimize your rates based on demand, seasonality, and local events.
4. Maintain accurate records of all income and expenses to maximize tax deductions and ensure compliance with tax laws.
5. Stay informed about changes in local regulations and adapt your business practices accordingly.

By following these steps and implementing these tips, you can successfully start and grow a profitable short-term rental business in Arizona. Remember to prioritize compliance with local regulations and focus on providing an exceptional guest experience to ensure the long-term success of your venture.

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

For questions or concerns regarding short-term rental regulations and zoning in Arizona, hosts and interested parties can contact the relevant city or county departments. Here are some key contacts:

City of Phoenix Planning and Development Department

1. Phone: (602) 262-7811
2. Email: pdd.customerservice@phoenix.gov
3. Website: https://www.phoenix.gov/pdd

The Phoenix Planning and Development Department can provide guidance on the licensing process, answer questions about the city's STR regulations, and assist with zoning-related inquiries. Hosts are encouraged to reach out if they need clarification on the requirements for operating a short-term rental in Phoenix.

Coconino County Community Development Department

1. Phone: (928) 679-8850
2. Email: comdev@coconino.az.gov
3. Website: https://www.coconino.az.gov/3052/Short-Term-Rental-Information

For short-term rental information in unincorporated Coconino County, contact the Community Development Department. They can assist with the registration process, ordinance questions, and general inquiries.

City of Flagstaff Short-Term Rental Program

1. Email: ShortTermRental@flagstaffaz.gov
2. Website: https://www.flagstaff.az.gov/4535/Short-Term-Rentals

Flagstaff hosts can email the Short-Term Rental Program for assistance with licensing, property activation, and other related questions. The city also provides a 24/7 short-term rental hotline for reporting issues: (928) 714-7951.

In addition to these official contacts, Arizona hosts may find valuable information and support through online communities and forums, such as:

Arizona Vacation Rental Owners & Managers (AVROM) Facebook Group: https://www.facebook.com/groups/AVROM/

Arizona Short Term Rental Alliance (ASTRA) Website: https://azvacationrentalalliance.org/

Bigger Pockets Arizona Real Estate Investing Forum: https://www.biggerpockets.com/forums/763-arizona-real-estate-investing

Arizona Real Estate Investors Association (AZREIA) Website: https://azreia.org/

These groups and forums provide a platform for hosts to connect with fellow short-term rental operators, share experiences, and seek advice on navigating local regulations and best practices.

By engaging with the appropriate city or county departments and participating in relevant online communities, Arizona short-term rental hosts can stay informed about regulations, zoning, and industry trends, ensuring the success and compliance of their rental businesses.

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

Arizona Airbnb hosts have shared their experiences and opinions about local short-term rental regulations on various online platforms, including Reddit and Bigger Pockets. Here are some notable examples:

Bigger Pockets Forum: In a thread titled "The Future of Phoenix Short Term Rentals (AirBnb)," a host expressed concern about potential future regulations, citing examples of other cities that have banned or heavily restricted short-term rentals. However, the host also acknowledged that Arizona's current laws are relatively friendly to STRs, with no restrictions on the number of properties an investor can own and rent using these platforms.

Reddit - r/arizona: In a post titled "Short Term REntals / AirBNB and how they affect our housing costs," a user shared their experience living in a small town near Sedona, where the increasing prevalence of short-term rentals is forcing out older residents on fixed incomes. Another user commented on the situation in Flagstaff, stating that their neighborhood is now "1/3 lived-in homes, 1/3 empty extra homes for the 1%, and 1/3 hotels."

Reddit - r/AirBnB: While not specific to Arizona, a post titled "Some of the rules for these AirBnBs are absurd. And they 100% discriminate based on age/gender [CA, USA]" sparked a discussion about the reasonableness of certain house rules and regulations. Some hosts defended strict rules, citing the need to comply with local noise ordinances and occupancy limits, while others argued that overly restrictive policies could deter potential guests.

These examples demonstrate that Arizona Airbnb hosts have mixed feelings about local regulations. While some appreciate the state's relatively lenient laws compared to other markets, others are concerned about the potential for future restrictions and the impact of short-term rentals on housing affordability and neighborhood character.

However, it's important to note that these opinions represent individual experiences and may not reflect the views of all Arizona Airbnb hosts. As the short-term rental industry continues to evolve, it's likely that the regulatory landscape in Arizona will also change, and hosts will need to stay informed and adapt to new requirements to ensure the success and compliance of their businesses.

Disclaimer: While we here at BNBCalc strive to keep all of our 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 area 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.