City of Los Angeles Transient Occupancy Tax: LA Rules

The Los Angeles short-term rental market offers an opportunity for real estate investors. With year-round tourism, business travel, and a vibrant entertainment industry, LA properties can generate substantial returns when properly managed. However, success requires more than finding the right property; it demands a thorough understanding of the regulatory landscape, with the City of Los Angeles Transient Occupancy Tax being a critical compliance factor for any host or investor.

This guide aims to demystify the LA transient occupancy tax for current and prospective short-term rental operators. We explain what this tax is, who pays it, how to calculate it, and provide a compliance roadmap. Whether you're operating a single guest room or managing multiple properties, this information is essential for legal operation and financial planning.

At STR Search, we help investors analyze every detail, from local taxes to market trends, to ensure every property meets its highest return potential. The first step in smart investing is factoring in costs like the TOT, which is why we've created this resource to support your Los Angeles short-term rental journey.

Transient Occupancy Tax (TOT) in the City of Los Angeles

The Transient Occupancy Tax (TOT) in Los Angeles, or "hotel tax," is a municipal tax on guests staying in accommodations for 30 consecutive days or less. A "transient" is defined as a person occupying for 30 consecutive calendar days or less. This tax applies regardless of whether the accommodation is a traditional hotel, motel, vacation rental, or a room in someone's residence.

The TOT exists to generate revenue for the City of Los Angeles to fund essential services and amenities that support tourism and enhance residents' quality of life. These include maintaining the Los Angeles Convention Center, cultural programs, infrastructure improvements, and public services. The tax responsibility falls on any individual or business operating accommodations for short-term guests within LA city limits, whether a large hotel chain or an individual renting out a spare bedroom.

TOT compliance is a mandatory component of Los Angeles' home-sharing ordinance. These are separate regulatory frameworks, but they work in tandem; you cannot legally operate a short-term rental in Los Angeles without registration under the home-sharing ordinance and compliance with the TOT requirements. Understanding and fulfilling both sets of obligations is essential for any host seeking to operate legally.

Current LA TOT Rate and Taxable

When operating a short-term rental in Los Angeles, apply the TOT to the total amount your guests pay, known as rent or taxable receipts. It's crucial to understand what is and isn't subject to this tax for accurate collection and reporting.

The Tax Rate

The current Transient Occupancy Tax rate in the City of Los Angeles is 14% of the total taxable receipts.

What does "Rent" include for tax purposes?

The 14% tax applies to more than just the basic nightly rate. Taxable receipts include:

• Nightly/Weekly Rate: The base charge for staying in the room or property.
• Cleaning Fees: Mandatory cleaning fees charged to guests are considered part of the taxable amount.
• Additional Guest Fees: Extra charges for exceeding base occupancy.
• Resort Fees or Similar Surcharges: Any mandatory fees guests must pay to stay at your property.
• No-Show Charges: Fees charged when a guest doesn’t check in but is charged for the room according to your cancellation policy.

What is NOT subject to the TOT?

Not all short-term rental charges are subject to the LA hotel tax. The following items are generally exempt:

• Security Deposits: Refundable security deposits returned to the guest (assuming no damages) are not subject to the TOT.
• Optional Services: Charges for additional, optional services that guests can choose to add or decline (e.g., mid-stay cleaning, equipment rentals, guided tours) if itemized separately on the guest's bill.
• Booking Platform Service Fees: The service fees that platforms like Airbnb or Vrbo charge directly to guests are not part of your taxable receipts as a host. These fees represent revenue for the platform, not for you.

Understanding these distinctions is crucial for short-term rental tax compliance in Los Angeles. It helps you avoid undercharging (which could leave you liable for the difference) and overcharging (which could result in guest complaints).

A Step-by-Step Guide for Hosts

At first, complying with the Los Angeles Transient Occupancy Tax requirements seems daunting, but it becomes manageable when broken down into clear, actionable steps. By following this approach, you ensure your short-term rental operation remains in good standing with the city while avoiding penalties.

Step 1: Register for a Transient Occupancy Tax Registration Certificate

Before you collect rent from short-term guests, you must register with the City of Los Angeles Office of Finance and obtain a TOT Registration Certificate. This certificate authorizes you to collect the transient occupancy tax from your guests.

To register, visit the LA Office of Finance's online portal at finance.lacity.org. The registration process requires detailed information about your rental business, including:

• Your business name and contact information
• The physical address of your rental property.
• If you have one, your Business Tax Registration Certificate (BTRC) number
• The date you began or will begin operating as a short-term rental.

Usually, there’s no fee to register for TOT collection, but failure to register before hosting guests can result in significant penalties. The TOT Registration Certificate must be renewed annually, and the certificate number must be displayed on your business tax renewal form.

Step 2: Collect the Tax from Guests

As a host, you must collect the Los Angeles TOT from your guests at payment. The tax must be clearly itemized on any receipt, invoice, or booking confirmation as "City of Los Angeles Transient Occupancy Tax" so guests understand this separate charge.

While this sounds straightforward, it's important to implement it correctly in your pricing strategy. Many hosts build the tax into their total price display but break it out during checkout, while others add it as a separate line item from the beginning. Whichever approach you take, transparency is key and a legal requirement.

Step 3: File and Remit the Tax to the City

After collecting the tax, you must file and remit it to the City of Los Angeles on a strict schedule:

• Filing Frequency: The TOT must be remitted monthly to the Office of Finance.
• Deadline: Payment is due on or before the 25th of the month after the rent collection. For example, taxes collected from guests in July must be filed and paid by August 25th.
• How to File: File online through the LA Office of Finance portal used for registration. Complete a TOT return detailing your total taxable receipts for the month and calculate the tax due.
• Record Keeping: Maintain detailed records of all short-term rental activity for at least four years, including:
  
  • Total rent collected from each guest
  • Amount of TOT collected
  • Copies of exemption certificates or documentation
  • Copies of all filed tax returns and payment confirmations

You must file a "zero-dollar" return to comply with Los Angeles transient occupancy tax requirements, even during months with no rental activity. Failure to file, even with no tax due, can trigger penalties.

Are There Exemptions to the LA Transient Occupancy Tax?

Most short-term stays in Los Angeles are subject to the TOT, but there are specific legal exemptions to know.Understanding these can help you apply the tax correctly and avoid overcharging your guests.

Exemption 1: Stays Over 30 Consecutive Days

If a guest stays in your property for over 30 consecutive days, they no longer qualify as a "transient" under the city's definition. The entire stay, including the first 30 days, becomes exempt from the TOT. If you've collected the tax for the first 30 days, you must refund it to the guest after their 31st day of continuous occupancy.

Exemption 2: Government Employees

Federal and California state employees traveling on official business are exempt from paying the TOT, but the exemption isn’t automatic. To qualify, the guest must:

• Pay with a government-issued credit card, or
• Provide a government exemption letter on official letterhead.
• Complete and sign an exemption form to keep for your records.

Exemption 3: Foreign Diplomats

Foreign government officers and employees with a valid U.S. Department of State tax exemption card are exempt from the TOT. Verify and copy their exemption card.

As the host, you must verify and document exemption claims. Before waiving the tax, secure proper documentation, as you’ll need it if your TOT returns are audited. Without it, you could be liable for uncollected taxes, penalties, and interest.

Role of Booking Platforms (Airbnb, Vrbo) in TOT Collection

Thanks to agreements between major booking platforms and Los Angeles, hosts benefit from administrative relief regarding the Airbnb tax. Platforms like Airbnb and Vrbo automatically calculate, collect, and remit the 14% Transient Occupancy Tax on behalf of hosts for reservations made through their websites. This automation simplifies the process for many hosts, especially those exclusively using these platforms.

However, hosts are still responsible for TOT compliance, even when using these platforms. This means:

• You must obtain and maintain a valid TOT Registration Certificate from the City of Los Angeles.
• You must file a monthly TOT return with the city, even if it's a "zero-dollar" return showing the platform paid on your behalf. This filing confirms your compliance and reconciles the platform's remittance against your total taxable receipts.
• If you accept bookings outside of these platforms, through your website, other booking sites, or direct inquiries, you are responsible for collecting and remitting the TOT for those transactions.

Hosts should regularly download and review their earnings statements from all booking platforms and cross-reference them with their city filings. This ensures all taxable receipts are accounted for and the correct tax amount has been remitted, providing a paper trail for audits.

Penalties for Non-Compliance: What's at Stake?

Los Angeles takes TOT compliance seriously. Failing to register, collect, or remit the tax can lead to substantial consequences. Understanding the penalties underscores the importance of diligent compliance.

• Late Filing Penalties: If you fail to file your TOT return by the monthly deadline (the 25th of the following month), you'll face an immediate penalty of 5% of the tax due. This penalty increases by an additional 5% (up to a maximum of 25%) for each month the tax remains unpaid.
• Interest Charges: In addition to the penalties, interest accrues daily on unpaid taxes and penalties at an annual rate set by the City. This rate is 7% per year, calculated daily.
• Audits and Liens: The Office of Finance can audit your TOT records for the past four years. If discrepancies are found, they can assess additional taxes, penalties, and interest. In serious non-payment cases, the city can place a lien on your property or assets.
• Criminal Charges: Under the Los Angeles Municipal Code, willful evasion of the TOT or filing false returns can be prosecuted as a misdemeanor. Convictions can result in fines up to $1,000 and/or imprisonment for up to six months.

These penalties highlight why proper TOT compliance should be a top priority for any Los Angeles short-term rental operator. Non-compliance can erase your rental business profits and create legal issues beyond monetary penalties.

Finding a Profitable and Compliant STR in Los Angeles

Understanding the Los Angeles Transient Occupancy Tax is essential, but it's one variable in the profit equation. The key to success is finding a property where the revenue potential far outweighs the costs and regulatory burdens. Tax compliance ensures legal operation, and strategic property selection determines your return on investment.

Data-driven analysis is essential. At STR Search, we help investors cut through the noise. We use advanced analytics to pinpoint LA neighborhoods and properties with the highest occupancy rates, ADR (Average Daily Rate), and overall ROI potential, after accounting for all expenses, including the TOT. Our approach goes beyond standard market research, incorporating seasonal trends, competitive saturation analysis, and regulatory risk assessment to identify exceptional investment opportunities.

Our proven 4-step process has guided investors through over $90 million in successful real estate transactions. We offer a Free Live Property Analysis to show how we vet properties for maximum profitability and compliance. This is valuable for high W-2 earners looking to leverage STR investments to offset their tax burden. By understanding the regulatory requirements and market dynamics, you can capitalize on the lucrative Los Angeles short-term rental market while minimizing risk.

Conclusion

The Los Angeles Transient Occupancy Tax is a significant responsibility for short-term rental operators, but with the right approach, it's manageable. Key points: the LA TOT is 14%, hosts must register with the city, file monthly returns, and maintain meticulous records. Compliance is crucial for a sustainable and profitable STR business in Los Angeles.

Don't let regulatory hurdles stop you from capitalizing on the lucrative LA market. With the right data and partner, you can invest confidently. Book your free property analysis with STR Search today and secure your high-performing investment property.

FAQ

Q1: What is the current Transient Occupancy Tax rate in Los Angeles?

A1: The current TOT rate for Los Angeles is 14%, charged on the total rental amount for stays of 30 days or less.

Q2: If Airbnb collects the tax for me, do I still need to file a TOT return?

A2: Yes. You still need a TOT Registration Certificate and file a monthly return with the city to report the activity, even if a platform like Airbnb remits the tax on your behalf.

Q3: What if I rent my property for 31 days?

A3: A rental of over 30 consecutive days to the same guest is not considered "transient." The entire stay is exempt from the TOT, so do not collect the tax for that booking.

Q4: Are cleaning fees taxable under the Los Angeles TOT?

A4: Yes, mandatory cleaning fees are part of the total "rent" and subject to the 14% Transient Occupancy Tax.