Tennessee Cabin Rental Taxes for Smoky Mountain Owners

1. The short version

2. Sales tax on every stay

Renting a cabin, chalet, condo or house for lodging is subject to Tennessee sales tax, made up of the state portion and a local portion set by where the property sits. The Department of Revenue administers both. Stays furnished to the same person for 90 or more continuous days are outside it.

• The taxable price is everything the guest has to pay to stay: the nightly rent plus booking fees, required cleaning fees, non-refundable pet deposits and property damage protection fees. Cancellation fees aren't taxable.
• On a direct booking, you collect and remit the sales tax.
• When you list through a platform that is a marketplace facilitator, the platform is treated as the seller and collects the tax on those bookings, and you aren't responsible for tax it collects. The Department suggests asking the platform whether it is a marketplace facilitator, and keeping records that show which stays went through it.
• Anything you rent or sell to guests yourself, like bikes, kayaks or firewood, is yours to tax even when the cabin itself was booked through the platform.
• Furniture and supplies bought from an out-of-state seller that didn't charge Tennessee tax owe Tennessee use tax.
• If a property management company provides the rentals, the manager must register for and collect the sales tax, in each jurisdiction where its rentals sit.

Owners who need an account register through TNTAP, the Department's online portal, and file sales tax returns there monthly.

3. Local occupancy (hotel/motel) tax

On top of sales tax, many Tennessee counties and cities impose an occupancy tax on short-term rental units, which state law defines as a residential dwelling such as a cabin, house or condo rented for less than 30 continuous days. These taxes come from local ordinances, county resolutions and private acts, so the rules, the forms and the office all belong to the local government where the cabin is. In the Smokies that can mean the county, a city such as Gatlinburg, Pigeon Forge or Sevierville, or both, depending on where the cabin sits, so start with the county and city offices for your address.

Who remits it. Since January 1, 2021, a short-term rental unit marketplace (the kind of platform where you list and guests book and pay) has to collect the local occupancy tax on bookings made through it and remit it to the Department of Revenue, which passes it on to the local government. Every other booking is still paid locally:

• Direct bookings: you collect the occupancy tax and remit it to the city or county. The Department's own example is a Gatlinburg cabin rented to a neighbor, with the occupancy tax going directly to Gatlinburg and the sales tax to the Department.
• Property managers: the law treats them as vacation lodging services, not marketplaces, so they don't send occupancy tax to the Department. Whether a manager collects it for you depends on the local code, which the Department tells managers to check.
• Everyone: the Department advises owners to contact the local officials where the cabin is, even if they rent only through a marketplace, because there may be local reports or requirements.

4. Tennessee business tax

Tennessee's business tax is a tax on gross sales, and the Department treats renting out vacation lodging (property other than the owner's own home, rented for overnight stays) as taxable business activity once the rental receipts reach the statutory threshold in a jurisdiction. Three points trip owners up:

• The platform doesn't take this one over. A marketplace is the seller only for sales tax and occupancy tax, so business tax on marketplace bookings stays with the owner.
• If a property management company provides the rentals, the manager, not the owner, owes business tax on the rental receipts.
• An owner who is subject registers with the county and the city where the property is located.

5. If the cabin is in an LLC: franchise and excise tax

Individuals and general partnerships aren't subject to Tennessee's franchise and excise taxes. Corporations, limited partnerships and LLCs are, and the Department says plainly that moving a rental into an entity with limited liability protection brings the cabin into the tax: franchise tax measured by the entity's net worth, which includes the book value of the cabin less its debt, and excise tax on its net earnings. The entity registers through TNTAP soon after it becomes subject and files an annual return (Form FAE170).

• A single-member LLC counts. The IRS disregards it for income tax, but Tennessee treats it as a separate taxpayer for excise tax.
• Obligated member entity. An LLC, LP or LLP whose owners all agree to be personally liable for its debts, and file that with the Secretary of State, is exempt. That gives up the liability protection that was usually the reason for the LLC.
• Family-owned non-corporate entity (FONCE). An LLC, LP or LLP is exempt if at least 95% is owned by family members (as the statute defines them) and at least two-thirds of its activity produces passive investment income, a term that includes rents from residential property with no more than four units at one location. Whether a particular short-term rental's receipts fit that definition is a question to settle before relying on the exemption.
• Both exemptions have to be claimed on Form FAE183, when first claimed and every year after.

6. Income tax: Tennessee's, and your home state's

Tennessee's only individual income tax, the Hall tax, reached interest and dividends and never wages or other earned income, and it was fully repealed for tax years beginning on or after January 1, 2021. So a cabin owned in your own name produces no Tennessee income tax return.

That doesn't make the profit tax-free. The federal return reports it, and so may your home state: South Carolina, for example, taxes its residents on all their income wherever it is earned. With no Tennessee tax paid on the rental, there is no Tennessee tax to credit against your home state's.

7. The federal side

Cabin rentals with short average stays can fall outside the passive activity rules, which is what people mean by the short-term rental loophole. If your family uses the cabin too, read renting a vacation home you also use before counting on a loss. For a larger property, cost segregation is worth a look.

8. How we help rental owners

We're a Louisville firm, licensed in Tennessee and eight other states, and we work with cabin owners wherever they live through a secure client portal. For Tennessee rentals that usually means:

• Sorting every booking into marketplace, manager and direct, and checking that sales tax and occupancy tax were paid for each by the right party to the right government.
• Registering, or confirming you don't need to register, for sales tax, business tax and local occupancy tax.
• Deciding on an LLC with the franchise and excise cost and the exemptions in front of you, and filing the FAE170 or FAE183 if you have one.
• Getting the federal and home-state returns right, including average stay, material participation and personal-use days.

9. Common questions