If you rent your vacation home on a short term basis, you are most likely required to charge your renters sales and lodging taxes. These taxes are set by city, county and/or state governments and may be increased or decreased by the city, county and/or state governments at any time. In most cases, these taxes are an important source of tax revenues in resort communities and are generally reinvested in the community.

Some examples of tax rate changes that have occurred in 2007 include:

This list does NOT reflect all of the sales and lodging tax rate changes that have occurred during 2007. Additional tax rate changes have occurred that are not noted here.

Normally, potential tax rate changes will make the local news. If you don't live in the same town as your vacation home, you may not read or watch the local news and, therefore, may not know about upcoming potential changes. A tax authority usually does not inform taxpayers of potential changes - only approved changes.

If you're already registered with the tax authorities in your area, you will most likely be notified of rate changes once those changes have been approved. Keep in mind, however, that there are situations where the tax authority will place an advertisement in a local newspaper announcing the tax rate change in lieu of mailing letters to each registered taxpayer.

All tax rate increases and decreases have an effective date which is the date the new tax rate goes into effect. Tax jurisdictions do their best to inform taxpayers of the change as soon as it has been approved. Unfortunately, there's not always a lot of time between the approval date and the effective date. Because vacation rental homeowners typically collect rent in advance of the actual stay, a tax rate increase can pose a dilemma for the homeowner. That's one reason why it's important to differentiate between rent and taxes on your invoices. Not only do most jurisdictions require the itemization of taxes on invoices, but it also may help you pass the tax rate increase on to your renter, instead of pay it yourself.

If you are unaware of a tax rate increase, you will still be liable for the increased tax amount - even if you didn't collect the tax from your renters. Additionally, tax jurisdictions may impose penalties and interest on any under-payments.

It is prudent to check with the tax jurisdictions in your area periodically for any tax rate changes. Remember to check for updates with the city, county and state tax authorities.

Because keeping up with all of the tax law changes can be challenging, HomeAway.com recommends that you utilize the expertise of HotSpot Tax Services (www.hotspottax.com). HotSpot Tax Services offers a low cost, effective, guaranteed solution for sales and lodging tax compliance for vacation rental homeowners throughout the U.S. Call HotSpot at 877-589-0207 or visit www.hotspottax.com to learn more about sales and lodging tax requirements in your area.

Article written by Kim Stephens. Kim is a Certified Public Accountant (CPA) with over 17 years of experience in accounting and finance. Kim is also the co-founder of HotSpot Tax Services, a company solely dedicated to helping vacation property owners with sales and lodging tax compliance. Kim can be reached at 877-589-0207 or www.hotspottax.com.