Vacation Rentals

Business Licensing Requirements

Vacation Rentals in the City of Prescott are required to register with the City of Prescott prior to offering the property for rent for a period of 29 consecutive days or less. There are two different types of license treatments explained below:

A. If the vacation rental is in residential zoning, you do not occupy the residence during the time period when the property is rented, and the facility is not a hotel, motel, or bed and breakfast the following apply:

  1. Transaction Privilege Tax License issued by the Arizona Department of Revenue. Begin reporting and paying transaction privilege tax on rental income.
  2. Vacation Rental License with the City of Prescott. Apply Now
    • The total fee for this initial application is $140, consisting a $100 annual vacation rental registration fee and a one-time $40 safety inspection fee. In subsequent years the fee for renewal will be $100.
    • Before applying for the vacation rental license, please review the list of required information to be submitted.
  3. Operational Requirements and Standard Conditions in City Code 4-9.

B. If you occupy and reside at the residence during the time period when the rooms are rented, or the property is in commercial zoning, or the facility operates as a hotel, motel, or bed and breakfast the following licenses apply:

  1. Transaction Privilege Tax License issued by the Arizona Department of Revenue. Begin reporting and paying transaction privilege tax on rental income.
  2. General Business License issued by the City of Prescott ($75 initial fee, $35 renewal).

Privilege (Sales) Tax for Vacation Rentals

As a vacation rental operating in the City limits, you will be required to collect and remit transaction privilege (sales) tax on gross income derived from the business activity. If you haven’t already, you will need to apply for a tax license with the Arizona Department of Revenue.

The City transaction privilege tax rate is 2.75% of the gross income. For all rental activity for a period of 29 consecutive days or less, there is an additional tax of 3% called transient occupancy or “bed tax”. All transient occupancy transactions are also subject to a state tax of 6.325%. The total tax rate for transient occupancy is 12.075%. If the rental transaction is for a period of 30 days or more, it would be classified as residential rental with a City tax rate of only 2.75% with no state tax. For more information, visit the privilege (sales) tax page.

Operational Requirements and Standard Conditions for Vacation Rentals

The owner or agent for vacation rentals in residential zoning and not owner-occupied during rental will be responsible for ensuring compliance with the operational requirements and standard conditions set forth in Prescott City Code 4-9.

The following are some important highlights of the requirements and standards for vacation rentals (review the City Code for the detailed list):

  • Maximum overnight occupancy of the vacation rental unit is specified as two persons plus an additional two persons per bedroom (thirteen years of age and older).
  • A local contact person is required who can respond in-person to the site of the vacation rental within 45 minutes to initial or successive complaints.
  • Prior to occupancy, the local contact person shall provide the responsible person of a vacation rental with the following information (this information must also be posted in a conspicuous place within the unit):
    • Good Neighbor Brochure
    • Name of the local contact person and 24 hour phone number
    • A copy of the combined business license/vacation rental certificate
    • Maximum overnight occupancy and notification that failure to conform is a violation of City Code 4-9
    • Trash pickup day and applicable rules pertaining to leaving or storing trash or refuse on the exterior of the property
    • Notice that noise levels shall not exceed those described in City Code 5-4
    • City Code Chapter 4-9
    • Notice that the occupant may be cited or fined for creating a disturbance or for violating other provisions of the chapter
  • Prior to occupancy, the owner or owner’s agent shall enter into a written rental agreement as specified in City Code 4-9-6(G)
  • The owner is required to notify property owners in immediate proximity on all sides that the property is used as a vacation rental including the name and 24 hour telephone number of the local contact person. A template letter is available below under resources.

Resources

Prior to occupancy, the local contact person shall provide the responsible person of a vacation rental with the following information (this information must also be posted in a conspicuous place within the unit):

CONTACT

  • Budget and Finance
  • Tax and Licensing
  • City Hall

    201 S Cortez St

  • 928-777-1268

FAQ

  • Property ownership information can be found online with Yavapai County’s Interactive Mapping application allows you to view maps and parcel ownership information.  This website also allows you to identify parcels within the 300 feet buffer zone with this icon.

  • Per State law, AirBnB and other online lodging marketplaces can elect to remit taxes on behalf of their listings in bulk to the Arizona Department of Revenue by jurisdiction.   However, currently, it is a voluntary program and not all marketplaces are doing it.  Thus, vacation rental owners are required to obtain a transaction privilege tax license and file tax returns.  A deduction can be taken for any gross receipts that tax has been remitted by the online lodging marketplace.

  • This would mean you are exempt from the requirements in City Code 4-9 for Vacation Rentals.  However, two licenses are still required.  First, you will need a Transaction Privilege Tax License issued by the Arizona Department of Revenue, and secondly a General Business License issued by the City of Prescott. You will be required to collect and remit transaction privilege (sales) tax on gross income derived from the business activity.

  • No matter what the zoning is, the tax treatment is the same.   As a vacation rental operating in the City limits, you will be required to collect and remit transaction privilege (sales) tax on gross income derived from the business activity.  The City transaction privilege tax rate is 2% of the gross income.  For all rental activity for a period of 29 consecutive days or less, there is an additional tax of 3% called transient occupancy or “bed tax”.  All transient occupancy transactions are also subject to a state tax of 6.325%.  Thus, the total tax rate is 11.325%.

  • Commercially zoned property is exempt from the requirements in City Code 4-9 for Vacation Rentals.  However, two licenses are still required.  First, you will need a Transaction Privilege Tax License issued by the Arizona Department of Revenue, and secondly a General Business License issued by  the City of Prescott.  You will be required to collect and remit transaction privilege (sales) tax on gross income derived from the business activity.

NEWS

City Offices, Library Closed November 12, In Observance of Veterans Day Residential and Commercial Trash and Recyclables will be collected

Posted on November 6, 2018

City of Prescott Offices and Public Library will be closed in observance of Veterans Day, on Monday, November 12, 2018.  Normal hours will resume on Tuesday, November 13. The City Solid Waste Division WILL BE collecting residential trash and recyclables… Read more »

View the Latest