Charlottesville Transient Occupancy Tax: Virginia STR Investors

Charlottesville's rich history, proximity to the University of Virginia, and thriving wine country contribute to its appeal. The blend of academic visitors, tourists, and business travelers creates consistent demand for quality accommodations year-round. Turning this market potential into a successful short-term rental investment requires more than just purchasing a well-located property—investors must also navigate regulatory requirements like transient occupancy tax by state and local compliance obligations, which hosts can better understand through an Airbnb occupancy tax guide.

Charlottesville STR owners must understand and manage the Charlottesville Transient Occupancy Tax (TOT). This local tax is mandatory for every host operating in the city, regardless of property type or booking platform. For those unfamiliar with what transient occupancy tax is, reviewing transient occupancy tax by state can provide valuable context for navigating Virginia's specific regulations. Airbnb hosts should also reference our Airbnb occupancy tax guide for platform-specific compliance strategies. Failure to properly register, collect, and remit this tax can result in penalties, interest, and potential legal issues that undermine your investment's profitability.

This guide outlines everything STR investors need to know about the Charlottesville Transient Occupancy Tax, including what it is, current rates, who pays it, and a step-by-step process for keeping your investment compliant and profitable. For platform-specific details, also reference our comprehensive Airbnb occupancy tax guide.

What is a Transient Occupancy Tax (TOT)?

If you're wondering what transient occupancy tax is, it's a fee on temporary accommodations, also known as lodging, hotel, or bed tax. This tax helps municipalities offset tourism-related costs, including infrastructure maintenance, public safety, and tourism promotion. It ensures visitors contribute to local services during their stay.

Key terms in Charlottesville's regulatory framework define how this tax operates:

• Transient: A person occupying a room or space for lodging for 30 consecutive days or less.
• Lodging: Any room, space, or facility for temporary occupancy, including hotels, motels, inns, vacation rentals, and short-term rentals on platforms like Airbnb and Vrbo.
• Lodging Provider: The person or entity operating the lodging facility responsible for collecting and remitting the tax. This is you as an STR investor.

Key takeaways about who this tax applies to:

• It applies only to stays of 30 consecutive days or less.
• The tax is based on the total lodging.
• As the host/operator, you are legally responsible for collecting it from guests and paying it to the city.

Requirements of Charlottesville Transient Occupancy Tax

Understanding Charlottesville's TOT requirements is essential for compliance and financial planning. For broader context beyond local regulations, our comprehensive Airbnb occupancy tax guide covers nationwide requirements. Here's what you need to know:

What is the Current Tax Rate in Charlottesville?

The Transient Occupancy Tax rate in Charlottesville is 8%. This tax is collected in addition to the Virginia state sales tax of 5.3% on lodging. Tax requirements across different jurisdictions can vary significantly, making it important to understand local regulations.

To show how this impacts your guests' total charges, consider a $200 per night stay. The Charlottesville TOT would be $16.00 (8% of $200), and the Virginia Sales Tax would be $10.60 (5.3% of $200), for a total tax of $26.60 per night. Your guest would pay $226.60 for a $200 room. Tax rates vary significantly across different locations, so understanding transient occupancy tax by state can help you better manage expectations for properties in multiple markets.

Who Must Register and Pay?

Any person or business acting as a lodging provider within Charlottesville city limits must register with the city, collect the tax from guests, and remit it to the authorities. This applies to individual homeowners renting a spare bedroom, property management companies overseeing multiple units, or LLCs owning investment properties. The legal structure of your business does not exempt you from this obligation.

What is the Taxable Amount?

The transient occupancy tax is based on the total amount paid by the guest for lodging. It's crucial to understand what is and isn't included in this taxable amount:

• Includes: The nightly room rate and mandatory guest fees.
• Excludes: Itemized charges like optional pet fees, mid-stay cleaning fees (if itemized), and service fees from booking platforms like Airbnb or Vrbo.
• Disclaimer: Check the City of Charlottesville's guidelines on the taxable "total charge" as interpretations may evolve.

4-Step Guide to STR Tax Compliance in Charlottesville

Ensuring compliance with Charlottesville's transient occupancy tax requirements doesn't have to be complicated. Follow this straightforward process to meet your obligations as an STR operator:

Step 1: Register with the City of Charlottesville

Before you host your first guest, register with the Charlottesville Commissioner of the Revenue as a lodging provider:

1. Obtain the "City of Charlottesville Food & Beverage and Transient Occupancy Tax Registration" form from the City of Charlottesville Commissioner of the Revenue website.

2. Complete the form with the following information:

• Business name (or your name if a sole proprietor)
• Physical address
• Mailing address for tax correspondence
• Contact information (phone and email)
• Federal Tax ID number (or Social Security Number if operating as an individual)

3. Submit the completed form to the Commissioner of the Revenue office.

4. Keep a copy of your registration and city confirmation for your records.

Step 2: Collect Guest Tax

After registering, implement a system to collect the appropriate taxes from your guests:

• For Direct Bookings: If you accept bookings through your website or other direct channels, manually add the 8% City TOT and 5.3% VA Sales Tax to the guest's bill. Ensure your booking system or invoice clearly itemizes these charges.
• For Platform Bookings (Airbnb/Vrbo): Some booking platforms collect and remit certain taxes on your behalf, but this varies by platform and location. Verify with each platform whether they are collecting both the Charlottesville TOT and Virginia sales tax for your property. Don’t assume this is happening automatically.

Even if a platform collects taxes on your behalf, you’re responsible for ensuring the correct amounts are remitted to the proper authorities. Many platforms collect state taxes but not local taxes, or vice versa, creating a compliance gap for unaware hosts.

Step 3: File Your Monthly TOT Return

You must file a regular tax return with Charlottesville, regardless of your booking volume or whether platforms collect taxes for you:

1. Use the "City of Charlottesville Transient Occupancy Tax Monthly Return" form on the city's website.

2. Complete the form with the following information:

• Your business name and registration information
• The reporting period (month and year)
• Gross receipts from short-term rentals for the month
• Calculation of tax due (8% of gross receipts)
• Any adjustments or credits (if applicable)

3. Submit the return by the deadline: The return and payment are due on or before the 20th day of the month after the taxes were collected. For example, taxes collected in January must be filed and paid by February 20th.

Step 4: Pay the Tax

The final step is to pay the collected tax:

1. Calculate the total amount due based on your monthly return.

2. Prepare payment using one of the city's accepted methods:

• Check or money order payable to "City of Charlottesville"
• If available, online payment through the city's portal.

3. If mailing, send your payment and completed return form to the Commissioner of the Revenue at the address on the form.

4. Zero-Return Reminder: If you had no bookings or revenue during a month, you must file a return showing zero gross receipts. Failing to file, even with zero activity, can result in penalties.

A Critical Distinction: City of Charlottesville vs. Albemarle County

In Charlottesville, STR investors often confuse properties in the City of Charlottesville and Albemarle County. These are separate legal jurisdictions with different tax authorities and rates.

Charlottesville is a distinct municipality surrounded by Albemarle County. Your property can only be in one jurisdiction. This matters because the Albemarle County Transient Occupancy Tax rate is 8.5%, different from Charlottesville's 8% rate. Additionally, the registration and remittance processes for Albemarle County are through the Albemarle County Department of Finance, not the City of Charlottesville.

To determine your property’s jurisdiction, use the official property lookup tools on the City of Charlottesville or Albemarle County websites. Enter your property address to confirm your jurisdiction before proceeding with registration to prevent compliance issues later.

Navigating Compliance: DIY vs. Expert Guidance

For a successful STR investment, ensuring 100% compliance from day one is non-negotiable. Investors approach this in two ways:

Partnering with an STR Investment Specialist like STR Search

Companies like STR Search guide investors through the acquisition and setup process. Their data-driven approach identifies properties with high return potential and ensures investors are prepared for market-specific requirements, like the Charlottesville Transient Occupancy Tax.

Benefits of this approach include:

• Holistic Analysis: Factoring in all operational costs, including local taxes, to project true ROI from the start.
• Process Expertise: Leveraging experience from over $90 million in transactions to streamline the setup process and avoid pitfalls.
• Tailored for High Earners: Providing specialized support for high W-2 earners looking to maximize returns and offset taxes through STR investments.
• Peace of Mind: Knowing from day one that your investment is built on a compliant and profitable foundation.

The DIY & Local Professional Route

Alternatively, investors can handle compliance independently by researching city and county websites, downloading the necessary forms, and managing the registration and monthly filing process. After purchasing a property, this requires assembling a team of local professionals, including a local accountant familiar with Charlottesville tax requirements and a lawyer to review your compliance.

While this approach can work, it’s reactive. After committing to a property, many investors scramble to understand local requirements, discovering compliance costs or operational restrictions not factored into their analysis.

Non-Compliance

Understanding non-compliance consequences highlights the importance of getting your tax procedures right from the start. The City of Charlottesville imposes significant penalties for failing to properly collect, report, or remit the transient occupancy tax:

• Late payment penalties of 10% of the tax due
• 10% annual interest on the unpaid balance
• Potential legal action for willful non-compliance, including property.
• After repeated violations, revocation of business licenses or STR permits.

Non-compliance can disrupt operations and create financial uncertainty that undermines your investment’s stability, beyond direct penalties. The time, stress, and potential legal costs of resolving tax issues far outweigh the effort to set up proper compliance procedures from the start.

Next Steps to a Profitable Charlottesville STR

The Charlottesville Transient Occupancy Tax is a manageable and mandatory aspect of operating a successful short-term rental in this Virginia market. By understanding the registration requirements, current tax rates, and filing deadlines, you can integrate these obligations into your workflows and financial projections from day one.

Understanding local tax law is one piece of the investment puzzle. To ensure your next STR investment in Charlottesville or anywhere in the U.S. is backed by industry-leading data and expert guidance, book a free live property analysis with the STR Search team today. We'll help you build a profitable portfolio the right way.

FAQ

Do I still need to register with Charlottesville if Airbnb collects the tax for me?

Yes. The City of Charlottesville requires the property owner/operator to register their business, even if a platform collects and remits the tax. You are ultimately responsible for compliance.

What if I had no guests that month?

You must file a monthly return form showing zero gross receipts for every reporting period.

Does the transient occupancy tax apply to stays of 31 days or more?

No. The tax only applies to "transients," defined as guests staying for 30 consecutive days or less. Longer-term rentals are exempt.

Can I deduct the Transient Occupancy Tax on my income taxes?

The TOT is a tax collected from guests and passed to the city. It’s not considered your income, so it’s not a deductible business expense. Consult a CPA for proper accounting.