Steps for Licensing a Vacation Rental in the City of Prescott:
- Apply for a combined Arizona & Prescott tax license through the Arizona Department of Revenue. Begin reporting and paying transaction privilege tax on rental income.
- Apply for a vacation rental business license for each separate location through the City of Prescott. Follow the operational requirements and standard conditions for vacation rentals.
Business Licensing Requirements
Vacation Rentals in the City of Prescott are required to register with the City of Prescott prior to offering the property for rent for a period of 29 consecutive days or less. For purposes of the vacation rental business license and operational requirements, vacation rental does not include commercially zoned property, hotels, motels, bed and breakfasts, time-share units, or the rental of a bedroom or bedrooms when the owner or leaseholder occupies and resides at the residence during the time period when the rooms are rented.
The total fee for this initial application is $585, consisting of a $35 annual business license fee, $100 annual vacation rental registration, and a one-time $450 for the health/safety inspection. In subsequent years the fee for renewal will be $135.
Before applying for the vacation rental license, please review the list of required information to be submitted.
Privilege (Sales) Tax for Vacation Rentals
As a vacation rental operating in the City limits, you will be required to collect and remit transaction privilege (sales) tax on gross income derived from the business activity. If you haven’t already, you will need to apply for a tax license with the Arizona Department of Revenue.
The City transaction privilege tax rate is 2% of the gross income. For all rental activity for a period of 29 consecutive days or less, there is an additional tax of 3% called transient occupancy or “bed tax”. All transient occupancy transactions are also subject to a state tax of 6.325%. The total tax rate for transient occupancy is 11.325%. If the rental transaction is for a period of 30 days or more, it would be classified as residential rental with a City tax rate of only 2% with no state tax. For more information, visit the privilege (sales) tax page.
Operational Requirements and Standard Conditions for Vacation Rentals
The owner or agent for vacation rentals will be responsible for ensuring compliance with the operational requirements and standard conditions set forth in Prescott City Code 4-9.
The following are some important highlights of the requirements and standards for vacation rentals (review the City Code for the detailed list):
- The combined business license/registration number issued by the city must be displayed in all advertising related to the vacation rental.
- Maximum overnight occupancy of the vacation rental unit is specified as two persons plus an additional two persons per bedroom (thirteen years of age and older).
- A local contact person is required who can respond in-person to the site of the vacation rental within 45 minutes to initial or successive complaints.
- Prior to occupancy, the local contact person shall provide the responsible person of a vacation rental with the following information (this information must also be posted in a conspicuous place within the unit):
- Good Neighbor Brochure
- Name of the local contact person and 24 hour phone number
- A copy of the combined business license/vacation rental certificate
- Maximum overnight occupancy and notification that failure to conform is a violation of City Code 4-9
- Trash pickup day and applicable rules pertaining to leaving or storing trash or refuse on the exterior of the property
- Notice that noise levels shall not exceed those described in City Code 5-4
- City Code Chapter 4-9
- Notice that the occupant may be cited or fined for creating a disturbance or for violating other provisions of the chapter
- Prior to occupancy, the owner or owner’s agent shall enter into a written rental agreement as specified in City Code 4-9-6(G)
- The owner is required to notify all property owners within 300 feet of the rental that the property is used as a vacation rental including the name and 24 hour telephone number of the local contact person. A template letter is available below under resources.
- Good Neighbor Brochure (Printed copies may be picked up at City Hall)
- Neighbor Notification Letter Template
Prior to occupancy, the local contact person shall provide the responsible person of a vacation rental with the following information (this information must also be posted in a conspicuous place within the unit):