The Illinois Department of Revenue (IDOR) issued new guidance that will impact online booking platforms that facilitate short-term rentals. The IDOR defines short-term rentals as any type of dwelling, such as house, condo, apartments, etc., located in Illinois rented for less than 30 consecutive days and reserved in advance by the guest. Beginning July 1, 2025, certain hosting platforms for short-term rentals, such as Airbnb, Vrbo, and similar companies, will be required to pay Hotel Operators’ Occupation Tax, previously only required by traditional hotels.
Under the new guidance, hosting platforms are now classified as re-renters of hotel rooms if they collect or process payment for Illinois hotels or short-term accommodations and grants access or facilitates the reservation of said accommodations, even if they don’t own or operate hotels directly. Traditional hotel operators are still required to collect and remit tax, even when rooms are rented through a third party. They cannot treat these bookings as exempt resale transactions. Even businesses based outside of Illinois must comply if, in the past 12 months, they had more than $100,000 in gross rental receipts or if they had 200 or more separate rental transactions in the state.
Businesses that meet the requirements must register with IDOR using MyTax Illinois or submit Form REG-1. Once registered businesses must file form RHM-1, and if applicable Form RHM-7 for multiple rental locations. Tax due is based on the full amount charged to the guest, including platform and service fees. However, businesses can deduct the amount already paid to hotel operators (including tax) using a special re-renter deduction line on their return. All operators must retain detailed records of taxable and non-taxable sales for a minimum of 3.5 years.
These standards align with economic nexus provisions seen in other state tax enforcement efforts, and it reflects the state’s effort to adapt its tax code to today’s digital economy. By clarifying and expanding the scope of tax obligations, the state seeks to promote fairness, streamline enforcement and ensure all lodging providers are taxed appropriately. If you operate or facilitate short-term rentals in Illinois, review your rental activity, and determine if you need to register now. For more information visit The Illinois Department of Revenue website.