How to calculate occupancy tax

01The formula

At its core, occupancy tax is one line of arithmetic:

• Occupancy tax = taxable revenue × combined rate

The work isn't the multiplication, it's determining the two inputs. The combined rate is the sum of every jurisdiction that taxes your property, and taxable revenue is the portion of what the guest pays that the tax applies to. Get those two right and the rest is a calculator.

02Step 1 · Find every authority that taxes the stay

Lodging tax rarely stops at the state line. A single stay can be taxed by several layers at once:

• State: a statewide sales or lodging tax administered by the department of revenue;
• County: a county room, tourist, or occupancy tax;
• City: a municipal hotel or lodging tax;
• Special districts: tourism improvement, convention, or resort-area districts that add their own levy.

Which layers apply depends on the property's exact address, not just the city name on the listing. Start with your state's Department of Revenue, then check the local Finance Department, Tax Collector, or Treasurer's Office for county and city taxes.

03Step 2 · Look up each individual rate

For every authority you identified, find the current rate it charges on short-term stays. A few things to watch for:

• Rates are published by each authority and can change between filing periods;
• Some taxes apply only to rentals under a certain number of nights (the definition of "short-term" varies);
• A jurisdiction may have both a general sales tax and a separate lodging tax that both apply.

04Step 3 · Add them up for your combined rate

Your combined rate is simply the sum of every applicable rate. For example:

• State lodging tax, 6%
• County tourist tax, 2%
• City hotel tax, 2%
• Combined rate = 10%

That combined percentage is what you add to the guest's bill and, later, what you report on each return, though each authority may want its own share reported separately at filing time.

05Step 4 · Apply the rate to taxable revenue

The rate applies to taxable revenue, which is usually more than just the nightly rate. In many jurisdictions it includes mandatory charges the guest can't opt out of:

• Room rent: the nightly rate times the number of nights;
• Mandatory fees: cleaning fees, resort fees, and similar charges are often taxable;
• Usually excluded: refundable deposits and, in some places, separately stated optional add-ons.

06A worked example

Say a guest books 4 nights at $150, with a $60 cleaning fee, in a location with a 10% combined rate where cleaning fees are taxable:

• Room rent: 4 × $150 = $600
• Plus mandatory cleaning fee: $60
• Taxable revenue: $600 + $60 = $660
• Occupancy tax: $660 × 10% = $66

The guest is billed $726 in total, and you set aside the $66 to remit when the return is due. If cleaning fees were not taxable in that location, you'd calculate the tax on $600 instead, $60, which is exactly the kind of address-specific detail that trips hosts up.

07Common mistakes to avoid

• Using the city rate only: and missing the county or special-district tax stacked on top;
• Taxing rent but not fees (or vice versa), when the jurisdiction says otherwise;
• Assuming Airbnb covers it: the platform may collect one layer and leave another to you;
• Not updating rates: a rate that was right last year may have changed;
• Rounding away the tax: small per-booking errors add up across a busy season.

08How Monterra helps

Calculating occupancy tax by hand means chasing rates across several offices for every property and re-checking them every period. Monterra brings occupancy tax automation to the whole job, acting as an STR tax calculator and filing service in one, so it's handled automatically:

• Exact rates: the correct combined rate is resolved by precise address, not city name;
• Right base: taxable revenue is computed per each jurisdiction's rules, fees included where they apply;
• Always current: rates update as authorities change them, so bookings are never taxed on stale data;
• Straight through to filing: the amount you calculated is the amount that gets filed and remitted, on time.