If you’re running or thinking about starting a short-term rental business in Pennsylvania, you need to know the rules, which vary by location. Aside from tax-related regulations, Pennsylvania doesn’t have a statewide policy; instead, each city has its own regulations. This article looks at three different areas: the large historic city of Philadelphia, the mid-sized lakeside city of Erie, and the small college town of State College. Each offers a look at how the Keystone state manages STRs.
Statewide Rules
Pennsylvania does not have state-level regulations other than a few related to taxation.
Taxes
In Pennsylvania, short-term rental operators must collect and remit a 6% hotel occupancy tax, the same rate as the state sales tax. Additionally, in Allegheny and Philadelphia counties, an extra 1% local hotel tax is levied. Some counties may impose further taxes. Certain third-party brokers may handle these taxes on behalf of hosts. Operators must register for a tax license at mypath.pa.gov before collecting taxes. You can file and pay the taxes electronically through myPATH. Income from short-term rentals should be reported on Tax Schedule C, while income from rentals over 30 days uses Schedules E, R or Royalty Income. For detailed and current tax information, refer to the Pennsylvania Department of Revenue’s website.
Municipal Rules
The keystone state’s STR rules vary greatly from one city to another. Here is a sampling of some of the different types of policies you can expect to encounter. I’ve chosen the state’s largest city, Philadelphia, a mid-size city in Erie, and the relatively small college town of State College to show a wide array of approaches.
Philadelphia
Philadelphia, a major city rich in history and culture, attracts visitors for its iconic landmarks, such as the Liberty Bell and Independence Hall, where the Declaration of Independence was signed. The city’s vibrant arts scene, diverse neighborhoods, and renowned culinary offerings—including the famous Philly cheesesteak—also draw tourists. Additionally, annual events cater to a variety of interests, making it a multifaceted destination for travelers and an outstanding place to have an STR business.
In Philadelphia, STRs are legal, but you’ll have your share of paperwork to fill out. To start a short-term rental business, you need a Philadelphia business tax account ID and a Commercial Activity License (available at no cost). The city also requires a zoning permit, which depends on whether the property is a primary residence (limited lodging use) or not (visitor accommodation use). The cost for this permit varies based on the scope of your project (click here for more details). These two uses also determine which kind of license you need. If you are renting your primary residence, you must get a limited lodging operator license. Otherwise, you’ll need a rental license with a hotel designation ($63 fee per unit).
Those renting their primary residences must comply with safety and operational regulations, including smoke and carbon monoxide alarms, and keep records for compliance.
If you operate an STR in Philly, your tax liabilities include the 8.5% Hotel Tax, the Net Profits Tax (3.75% for residents and 3.44% for non-residents), the Business Income and Receipts Tax, and the Wage Tax (same rates as Net Profits Tax) if employing staff.
Erie
On the northwestern edge of the state Erie, PA, attracts tourists and short-term renters with its beautiful lakeside setting on Lake Erie, offering scenic views, outdoor activities, and a rich cultural and historic heritage. The city’s rules offer an excellent business environment for STRs with straightforward rules.
The Erie City Council recently passed new ordinances to regulate short-term rentals. Any dwelling unit or room located in specific zooming districts can be rented for less than 30 days if the property owners obtain a rental license from the city. Operators must ensure occupancy does not exceed the limit allowed in their zoning district and that guests respect the neighborhood’s peace and quiet. Outdoor accommodations, such as RVs and campers are prohibited for overnight stays.
State College
State College attracts many visitors to central Pennsylvania for football games, graduation ceremonies, outdoor activities, and a vibrant local food scene with microbreweries, farmers’ markets, and farm-to-table restaurants. So it’s no surprise that many people in the area earn extra income with an STR sideline, especially during periods of peak demand when the Nittany Lions take the field or when undergraduates are receiving their diplomas.
The borough of State College passed new rules for rentals under 30 days in 2022. Operators need to obtain an annual $300 license, which must be displayed in rental listings. Only properties that are a principal residence of the owner or a tenant for at least eight months per year are eligible for the license. The home must offer off-street parking (one space per bedroom), have at least $100,000 of liability coverage for rentals, and be rented for less than 120 days annually. No more than nine bedrooms can be used for rentals. In addition, a person responsible for the rental must live within 25 miles of the home. Non-compliance leads to warnings and fines, and if rentals at a home become a public nuisance, the borough can revoke the license.
In Pennsylvania, each city’s approach to short-term rentals reflects its unique character and needs. Whether you’re running an STR as a business or side gig, you need to understand and follow these local rules to avoid penalties and be a responsible business owner. While this article provides a general overview for the state and local rules, it should not be construed as legal advice. For detailed and current information on STR regulations in Pennsylvania, you should contact your local government or seek advice from a real estate specialist or attorney. I wish you every success with your Pennsylvania STR business!