Rhode Island updates short-term rental taxes in 2026
Rhode Island is changing how short-term rentals are taxed beginning January 1, 2026. The update increases the local hotel tax rate and introduces a new tax on whole-home short-term rentals, affecting property owners, managers, and platforms facilitating short-term accommodations.
Written by Alex Lamachenka
Head of DemandGen
Published
Key points
- Rhode Island’s local hotel tax rate will increase from 1% to 2%.
- A new 5% tax will apply to short-term rentals of entire residential dwellings.
- Taxability and rates are determined by the date of occupancy, not the booking or payment date.
What’s changing
- Local hotel tax:
- Previous rate: 1%
- New rate: 2%
- Applies to all short-term rentals, including hotels and residential properties
- Whole-home short-term rental tax:
- New tax: 5%
- Applies to short-term rentals of an entire residential dwelling
- Effective date: January 1, 2026
Short-term rentals are defined as rentals of lodging for 30 consecutive days or fewer.
How this tax applies beginning January 1, 2026
For stays with occupancy on or after January 1, 2026, the applicable taxes depend on the type of rental:
- Room rentals (hotels and similar accommodations):
- 7% sales tax
- 5% statewide hotel tax
- 2% local hotel tax
- Entire residential dwellings rented short term:
- 7% sales tax
- 5% whole-home short-term rental tax
- 2% local hotel tax
A single short-term stay will not be subject to both the 5% statewide hotel tax and the 5% whole-home short-term rental tax.
Why this matters for sellers and platforms
Rhode Island’s update adds a new tax layer and requires sellers to distinguish between room rentals and entire residential dwellings when calculating tax. Combined with occupancy-date sourcing, this increases the risk of miscalculating tax for bookings that span calendar years or involve upfront payment.
Platforms facilitating short-term accommodations may also have collection obligations depending on their role in the transaction under Rhode Island law.
Who this affects
- Owners of short-term rental properties in Rhode Island
- Property managers and hospitality operators
- Marketplace facilitators and booking platforms
- Sellers responsible for collecting and remitting Rhode Island lodging-related taxes
If you use TaxCloud
TaxCloud automatically updates sales tax rates and jurisdiction changes across state and local authorities. Sellers with taxable exposure in Rhode Island can rely on TaxCloud to keep rate changes current without manual updates.
Next steps for sellers
- Calculation: Update tax calculation logic to apply the new local hotel tax rate and the new whole-home short-term rental tax for occupancies starting January 1, 2026.
- Review: Confirm listings and booking systems correctly distinguish between room rentals and entire residential dwellings.
- Reporting: Ensure returns reflect the correct tax type and rate based on occupancy date, not booking date.
Official sources:
-
1.
Rhode Island Department of Revenue Effective 1/1/26 - Changes to the taxation of short-term rentals. Source link
Disclaimer
TaxCloud provides sales tax compliance solutions. We do not provide legal or tax advice. For questions about your specific tax situation or filing requirements, we recommend consulting a qualified sales tax accountant.
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