Tennessee Airbnb and Short Term Rental Regulations (2025 Update)

Tennessee has become a hotspot for Airbnb and short-term rental investors thanks to its booming tourism, legendary music scene, and standout food culture. But before jumping in, it’s essential to get familiar with the state’s short-term rental laws. At the state level, short-term rentals are legal and protected under Tennessee’s Short-Term Rental Unit Act, which limits how much local governments can restrict them. Basically, cities and counties can only block rentals when there’s a genuine concern for public health or safety.

That said, local rules still matter. Cities like Nashville and Memphis have specific requirements, including permits, zoning restrictions, and registration. Staying compliant with both state and local laws is key to avoiding issues.

If you’re considering turning your property into an Airbnb but aren’t sure whether it’s allowed in your area, Awning can help. As a national property management company, they’re experienced with local laws and can walk you through what’s required. Call or text 415-941-5206 to connect with an Awning agent and find out if your property qualifies.

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Tennessee’s Definition of a Short Term Rental

Tennessee's Short-Term Rental Unit Act, effective since May 17, 2018, defines a short-term rental as any residential dwelling—be it a single-family home, apartment, condo, cooperative, or timeshare—that's rented out fully or partially for less than 30 consecutive days.  This categorization distinguishes short-term rentals from hotels, motels, and bed-and-breakfast establishments.

Unlike states such as California, which cap non-owner-occupied short-term rentals to a maximum of 180 days per year, Tennessee's legislation doesn't differentiate between owner-occupied and non-owner-occupied properties. This inclusive approach makes Tennessee an attractive market for both local and out-of-state investors looking to delve into the vacation rental industry.​

A pivotal aspect of the Act is its limitation on local governments: they cannot prohibit or regulate the use of properties as short-term rentals based solely on their classification, use, or occupancy.  This provision sets Tennessee apart from many other states, fostering a legislative environment conducive to the growth of vacation rentals.

However, the Act does permit local authorities to implement restrictions or bans on short-term rentals when public health and safety are at stake.  This ensures that while the rights of property owners and hosts are upheld, the well-being of the general public remains a priority.​

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Starting a Short Term Rental Business in Tennessee

If you're considering turning your Tennessee property into a short-term rental, it's essential to understand the state's business tax and licensing requirements. While there's no state-level license needed, you'll need to navigate county and city obligations to ensure compliance.

1. Business Tax Registration

Operating a short-term rental in Tennessee requires obtaining business licenses at both the county and city levels:​

• County Business License: Secure a license from the county where your rental property is located.​
• City Business License: Obtain a license from the city of your rental property.​

Each license involves a $15 registration fee, payable to the respective county and city clerks. It's important to note that these licenses must be obtained before commencing rental operations. ​

2. Gross Receipts Thresholds

Your gross receipts determine the type of license required:​

• Minimal Activity License: If your annual gross receipts are between $3,000 and $100,000, you must obtain this license from your local county and/or city clerk.
• Standard Business License: For gross receipts exceeding $100,000, this license is required. You'll need to register with the Tennessee Department of Revenue and file annual business tax returns. ​

Short-term rental operators are classified under Classification 3 for business tax purposes, as they are considered providers of overnight accommodations.

3. Registration Process

1. Register with the Tennessee Department of Revenue: Begin by registering your business through the Tennessee Taxpayer Access Point (TNTAP). The registration process typically takes up to 10 business days.
2. Obtain Local Business Licenses: After state registration, contact your county and city clerks to pay the $15 license fees and obtain the necessary business licenses. Ensure this is done within 20 days of commencing business operations to avoid penalties.

4. Filing and Payments

• Business Tax Returns: Due annually on the 15th day of the fourth month following your fiscal year-end. For example, if your fiscal year ends on December 31, your return is due by April 15.
• Tax Rates: For Classification 3, the tax rate is 0.001875% of gross receipts.

Important Considerations

• Multiple Properties: If you operate rentals in multiple jurisdictions, you must obtain separate licenses for each county and city. However, only one business tax return per jurisdiction is required, covering all properties within that area. ​
• Thresholds for Registration: If your annual gross receipts in a jurisdiction are less than $3,000, you're not required to obtain a business license or pay business tax. For receipts between $3,000 and $100,000, a minimal activity license suffices. Receipts over $100,000 necessitate a standard business license and tax filings.

By adhering to these guidelines, you can confidently and legally operate your short-term rental in Tennessee, ensuring compliance with all state and local regulations.

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License Renewals for Short-Term Rentals in Tennessee

In Tennessee, business licenses for short-term rentals generally renew automatically each year—as long as you stay on top of your tax filings. If you're operating with a standard business license (meaning you make over $100,000 in gross receipts annually), your license gets renewed after you file and pay your state business taxes. 

No need for a separate renewal form or fee—just make sure your return is on time. For those with a minimal activity license (between $3,000 and $100,000 in receipts), renewal is done locally with your county or city clerk, usually for a $15 fee each year.

That said, the renewal process can vary a bit depending on your location. Some places, like Nashville, send out email reminders ahead of expiration, while others expect you to remember on your own. To avoid any surprises, it’s smart to confirm the process with your local government office and make sure your contact info is current. Staying ahead of deadlines keeps your rental running without hiccups.

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Required Documents for Tennessee Short Term Rentals

Starting a short-term rental in Tennessee doesn't require a state-level license, but you'll need to obtain business licenses from both your county and city authorities. The specific documents required for these licenses can vary depending on your property's location. 

Commonly requested items include proof of ownership, personal identification, and a detailed floor plan of your property. Some jurisdictions might also ask for proof of insurance or safety inspections. It's essential to consult your local county and city clerk's offices to determine the exact documentation needed for your area.

Additionally, certain Tennessee cities have their own specific requirements. For instance, Sevier County mandates that short-term rental operators obtain a county business license and adhere to local lodging tax regulations. They also require an annual fire inspection for properties outside city limits.  Given these variations, it's crucial to check with your local authorities to ensure you're meeting all necessary requirements for your short-term rental.

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Tennessee Short Term Rental Taxes

Navigating Tennessee's tax landscape is crucial for Airbnb hosts and short-term rental operators. Here's a breakdown of the key taxes you should be aware of:​

1. Sales Tax

In Tennessee, short-term rentals (defined as stays of less than 90 consecutive days) are subject to a state sales tax of 7% on the total rental price, which includes cleaning and guest fees. Additionally, local sales taxes range from 1.5% to 2.75%, depending on the county, bringing the combined average sales tax rate to approximately 9.55%.

If you list your property through an online marketplace facilitator like Airbnb or Vrbo, these platforms are required to collect and remit the sales tax on your behalf. However, it's essential to maintain accurate records to confirm that taxes have been appropriately handled. ​

2. Use Tax

Use tax applies to tangible personal property used in Tennessee on which no sales tax has been paid. For instance, if you purchase furniture or supplies for your rental from an out-of-state vendor who doesn't charge Tennessee sales tax, you're responsible for reporting and paying the equivalent use tax directly to the Tennessee Department of Revenue.

3. Business Tax

Short-term rental operators with gross receipts of $100,000 or more in a county or city jurisdiction are required to register for and pay business tax to the Tennessee Department of Revenue and obtain a business license from the respective county and, if applicable, city. This tax is due annually, and the rates vary by jurisdiction. If your gross receipts are below this threshold, you're not subject to the business tax but should stay informed about any changes.

4. Franchise and Excise Taxes

If you operate your short-term rental through a limited liability company (LLC) or another entity that provides limited liability protection, you may be subject to Tennessee's franchise and excise taxes. These taxes apply to the net earnings of the entity and its net worth. Sole proprietors and general partnerships without limited liability protection are generally exempt from these taxes.

5. Occupancy Taxes

Many Tennessee municipalities impose local occupancy taxes on short-term rentals, often referred to as hotel or lodging taxes. The rates and regulations vary by city and county. Platforms like Airbnb may collect and remit these taxes on your behalf, but this depends on agreements with specific jurisdictions. If the platform doesn't handle this, you're responsible for collecting and remitting the occupancy taxes directly to the appropriate local authority.

Tax Deductions

Operating a short-term rental comes with potential tax deductions that can enhance your profitability. Common deductible expenses include:​

• Mortgage Interest​
• Property Taxes​
• Insurance Premiums​
• Utilities​
• Maintenance and Repairs​
• Cleaning Services​
• Supplies for Guests​
• Depreciation of Property and Assets​
• Advertising and Marketing Costs​
• Property Management Fees​

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Statewide Short-Term Rental Rules in Tennessee

Tennessee keeps things pretty simple when it comes to statewide rules for short-term rentals, which is great news if you’re an Airbnb host. The main focus is on making sure your guests are safe. That means you’ll need to install and maintain things like smoke detectors, carbon monoxide alarms, and—depending on the size of the property—possibly fire sprinklers. Regular testing and upkeep are part of the deal, too.

But here’s the thing: while the state gives you a lot of flexibility, cities and counties can (and do) set their own rules. So before you start renting out your place, make sure you check with your local city or county government. Their websites are usually the best place to find up-to-date info on permits, zoning, and other requirements you’ll need to follow.

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Short Term Rental Rules By Tennessee City

While Tennessee’s Short-Term Rental Unit Act limits how far local governments can go in restricting short-term rentals, each city still has the power to create its own licensing and zoning rules. Here’s a simplified breakdown of what you need to know in the top Airbnb markets across the state:

Chattanooga

Chattanooga allows both owner-occupied and non-owner-occupied short-term rentals, but with some zoning limitations and a required certificate from the city.

• Homestays (owner-occupied) are permitted in many residential zones; non-owner-occupied rentals are limited to specific commercial zones.
• You’ll need a Short-Term Vacation Rental (STVR) Certificate: $250 for homestays, $500 for non-owner rentals, plus annual renewal fees.
• A local contact must be available within 2 hours to handle any complaints or emergencies.
• Properties must pass safety inspections and follow local codes for parking, occupancy, and noise.

More info from Chattanooga Chamber.

Knoxville

Knoxville classifies rentals by how they’re used and where they’re located, with three permit types depending on ownership and zoning.

• Type 1: Owner-occupied in residential areas ($70 application).
• Type 2: Non-owner-occupied in nonresidential zones ($120 application).
• Type 3: Grandfathered non-owner rentals pre-2017 (not renewable).
• Local contact must be available within 45 minutes.
• Annual renewal for active permits is $50, and operating without a permit results in daily fines.

More info can be found here.

Memphis

Memphis began enforcing updated STR rules in 2023, requiring permits and annual renewals.

• $300 application fee, $150 renewal.
• Each property needs its own permit; they aren’t transferable.
• Hosts must designate a local contact available within 2 hours and carry liability insurance.
• Rentals must meet zoning rules and fire safety codes and collect local and state taxes.

Clarksville

Clarksville allows both owner-occupied and non-owner-occupied STRs, but requires a permit and compliance with specific safety and tax requirements.

• Initial application fee is $150; annual renewal is $120.
• You’ll need proof of ownership, a business license, safety equipment, and a site plan.
• Local contact required and inspections must be passed before approval.
• Food service is not allowed, and occupancy and parking limits apply.

More info can be found here.

Nashville

Nashville has some of the strictest rules in the state, especially for non-owner-occupied rentals in residential zones.

• Owner-occupied rentals are widely allowed; non-owner-occupied ones are only permitted in select non-residential districts.
• Permit application requires proof of residence, insurance, tax compliance, and sometimes HOA documentation.
• $313 fee on approval, plus annual renewal.
• Max occupancy is 12 people, and STRs must comply with local noise, waste, and safety codes.

Gatlinburg

Gatlinburg is STR-friendly, but your property needs to be in a zoned area and meet safety requirements.

• Requires a Tourist Residency Permit; $200 for 2 bedrooms + $75 per additional bedroom.
• Properties over 3 bedrooms or 5,000 square feet must have sprinklers.
• You’ll also need to designate a rental agent and follow all tax and safety rules.

Pegram

Pegram currently has no specific short-term rental ordinance at the city or county level, making it one of the easiest places to start hosting in Tennessee.

• You’re only subject to statewide requirements like safety regulations and applicable taxes.
• Still a good idea to verify zoning and HOA rules on a case-by-case basis.

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Takeaway

Thanks to its mix of natural beauty, vibrant cities, and music-filled culture, Tennessee has quickly become one of the top places to invest in short-term rentals. What makes it even more appealing? The state’s relatively relaxed laws. Unlike some states that limit rentals to just a few weeks a year or ban non-owner occupied properties altogether, Tennessee generally gives hosts a lot more breathing room—especially if you do your homework and follow local rules.

Thinking about listing your property but unsure if you’re allowed to run a short-term rental in your area? Awning can help. As a nationwide property management team, they’re up to speed on STR laws across the board and can guide you through what’s needed. Call or text an Awning agent today at 415-941-5206 to find out if your property qualifies.

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