Rhode Island Short-Term Rental Tax Changes Now in Effect: What Hosts and Property Owners Need to Know

If you own or manage a short-term rental property in Rhode Island, two important tax changes
are now in effect and may impact how you price rentals, collect tax from guests, and reconcile
bookings.

The Rhode Island Division of Taxation issued guidance confirming that these updates apply to
short-term rentals with occupancy on or after January 1, 2026.

Below is a clear breakdown of what changed and what short-term rental operators should
review now to stay compliant.

What Rhode Island Considers a Short-Term Rental

Rhode Island defines a short-term rental as any rental of lodging where the rental period is 30
consecutive days or fewer.

Change #1: Local Hotel Tax Increased from 1% to 2%

All short-term rentals in Rhode Island, including hotels, are subject to a “local” hotel tax. As of
January 1, 2026, the local hotel tax rate increased from 1% to 2%.

Why this matters: Even a small rate change can create a tax shortfall if your platform settings,
guest invoices, or remittance calculations weren’t updated for 2026 occupancy.

Change #2: New 5% “Whole Home” Short-Term Rental Tax
In addition to the local hotel tax increase, Rhode Island implemented a new tax for whole-home
rentals.

Beginning January 1, 2026, a new 5% tax applies to the short-term rental of a residential
dwelling rented in its entirety.

This generally includes:

• Houses

• Condos

• Mobile homes

• Other residential dwellings rented in full

• Vacation rentals and rentals offered through online hosting platforms

This new tax is calculated based on the total charge for the rental.

Room Rental vs. Whole-Home Rental: The Difference Matters
Rhode Island made an important distinction that affects which 5% tax applies:

• The 5% statewide hotel tax applies to single room rentals (such as hotels or other short-
term room rentals).
• The new 5% whole-home short-term rental tax applies when a residential dwelling is
rented in its entirety.

It is important to note that a single stay should not be subject to both 5% taxes.

What Taxes Apply to Short-Term Rentals

The Division of Taxation included a helpful summary table outlining what should be collected
depending on the rental type and length of stay (page 2).

If you rent a room for 30 days or less:

You should collect and remit:

• 7% sales tax
• 5% statewide hotel tax
• 2% local hotel tax

If you rent an entire residential dwelling for 30 days or less:

You should collect and remit:

• 7% sales tax
• 5% whole-home short-term rental tax
• 2% local hotel tax

If the stay is more than 30 days (with no break in occupancy):

Generally, you collect no sales tax and no hotel/whole-home short-term rental tax, whether it
is a room rental or a whole-home rental.

Bookings Made in 2025 for 2026 Stays: A Common Trouble Spot
Many short-term rentals are booked far in advance, and Rhode Island has addressed this
directly.

According to the state, all state and local taxes are based on the date of occupancy, and the tax
rates in effect at the time of occupancy apply.

If full payment was made in 2025 for a stay in 2026, the state’s guidance indicates the taxes
collected may have been based on 2025 rates, and the difference should be charged at
checkout.

If you had reservations that crossed into early 2026, it may be worth reviewing whether the
correct tax was collected and whether any adjustments are needed.

What Short-Term Rental Owners Should Review Now

If you operate short-term rentals in Rhode Island, now is a good time to:

• Confirm whether your rental is treated as a room rental or an entire residential dwelling
rental
• Review platform settings (Airbnb/VRBO/property managers) to ensure the correct taxes
are being applied
• Evaluate bookings made before January 1, 2026, for occupancy after that date to
confirm correct tax treatment
• Document how taxes are being collected and remitted to reduce compliance risk

Questions? Sansiveri Can Help

Short-term rental taxes can add up quickly, and small classification differences can have a
meaningful impact on what needs to be collected and remitted.

If you have questions about how these changes apply to your rental activity, our team can help
you review your current setup, confirm the correct tax treatment, and address any bookings
impacted since the January 1, 2026 effective date.