Long-term or Short-term Housing & Vacation Rentals

Renting all or a portion of a dwelling for commercial purposes is considered engaging in business on the island requiring the owner(s) to obtain a City Business License. Doing business includes renting a dwelling or portion of a dwelling as temporary or short-term housing or as a vacation rental through such lodging websites as AirBNB and VRBO.

Per Chapter 5.05.030 of the Municipal Code, "the term "engaging in business" means commencing, conducting, or continuing business, and also the exercise of corporate or franchise powers, as well as liquidating a business when the liquidators thereof hold themselves out to the public as conducting business." BIMC 5.05 specifically states engaging in business occurs where a person leases real property that is permanently or temporarily located with the City.  Furthermore, Ordinance No. 2018-35 sets forth "owning, renting, maintaining, or have the right to use, or using, tangible personal property, intangible personal property, or real property permanently or temporarily located in the city" by a person, or its employee, agent, representative, independent contractor, broker or another acting on its behalf constitutes engaging in business and requires a person to register and obtain a business license.

Please Note: Per Municipal Code and Ordinance No. 2018-35, the City requires licensing for all rentals regardless of duration of occupancy. Meeting the City business licensing requirement through the State of Washington Business Licensing Service, the State service directing administrative oversight of City licensing, means the property owner must apply for a Washington State Unified Business Identifier (UBI), commonly referred to as a State Business License.


ATTENTION PROPERTY OWNER(S):  The property owner must obtain a City Business License. Property owners often use the short-term platforms of our sharing economy such as AirBNB, VRBO, or more traditional brick and mortar vacation rental managers to rent their property or portion of their property. These services and managers, however, do not typically own the property being rented. Business licenses are obtained by those engaging in business. In terms of vacation or short-term rentals, the property owner is the entity engaging in business by renting of his/her property (Ordinance No. 2018-35). The property owner cannot use the UBI (Unique Business Identifier, also referred to as a business license number) of the property manager or short-term platform.


ATTENTION PROPERTY MANAGERS: Property managers and property management companies must obtain a City Business License. Property managers overseeing property or properties within the City are engaging in business in acting as an agent or representative of the property owner thereby requiring a Business License (Ordinance No. 2018-35).


Regulations

At this time, the City does not place additional requirements on long-term or temporary/short-term housing or vacation rentals beyond requiring a business license with the exception of defining a suitable dwelling for temporary/short-term or vacation occupation. According to Chapter 18.36 of the Municipal Code:

  • A "bed and breakfast" means a single-family residence that is owner-occupied and in which (a) three or more guest rooms are provided within the residence or within accessory buildings, for compensation, as overnight accommodations for transient visitors who remain no longer than two weeks in any one visit, and (b) breakfast is customarily included in the charge for the room. A bed and breakfast lodging is not a hotel, motel, inn, home occupation or other use defined or regulated elsewhere in this title, except that bed and breakfast establishments containing one or two sleeping rooms may be considered a minor home occupation as defined and regulated elsewhere in the Municipal Code.
    • Please Note: Bed and breakfasts are prohibited in some areas of Bainbridge Island and this zoning restriction is applied to vacation rentals. Before you apply for a business license, contact Planning and Community Development to determine if your property is zoned appropriately for a bed and breakfast.
  • "Dwelling" or "dwelling unit" means a building or portion of a building that provides independent living facilities with provisions for sleeping, eating and sanitation; provided a recreational vehicle or bus is not a dwelling or dwelling unit.
    • Please Note: RVs and travel trailers are not dwellings and cannot be used as temporary/short-term housing or vacation rentals.

Important Notes Regarding Short-term Platforms: Under State law, entities such as AirBNB and VRBO are termed "short-term platforms" and have different laws governing their business within the State. According to a 2015 State policy, an agreement was reached with AirBNB and applicable to all similar platforms. The platform is required to register in the State and pay lodging taxes directly to the State though the platform is not required to hold a city business license. (Note: Property owners must obtain a City business license per Ordinance No. 2081-35.)

In addition to the above, be aware Washington State and Kitsap County continue to debate regulations pertaining to temporary/short-term housing and vacation rentals with particular interest in short-term platforms. Any owner of temporary/short-term or vacation housing on Bainbridge Island, or any owner considering renting out a dwelling as temporary/short-term housing or vacation rental on Bainbridge Island, is to fulfill and meet any and all requirements set by the State of Washington and Kitsap County in relation to temporary/short-term housing and/or vacation rentals.

In April 2019, the State passed House Bill SHB 1798 requiring short-term operators (i.e., property owners) using short-term platforms to provide customers with the following consumer safety protections:
  • Provide contact information of someone available to respond to guest inquiries during the length of stay;
  • Comply with all laws and regulations related to carbon monoxide alarms; and
  • Conspicuously post the rental unit's address, emergency services contact information, floor plan with fire exists and escape routes, maximum occupancy limits, and operator contact information. 

Owners or operators who do not comply with the safety requirements may receive a warning letter from the City or County prosecutor. An owner who does not comply after receiving a warning letter is guilty of a class 2 civil infraction.

SHB 1789 also requires short-term operators (i.e., property owners) to maintain primary liability insurance to cover the short-term rental unit or conduct the rental through a platform that provides insurance coverage. The insurance policy may not be less than $1 million and nothing prevents an operator or platform from seeking contributions from any other insurer also providing primary liability insurance coverage for the short-term rental to the extent of that insurer's primary liability coverage limits.


Taxes

Long-term/short-term and vacation housing income is considered "gross income on the island" and is subject to City Business & Occupation Tax (B&O).  The City B&O is a separate tax from the housing and vacation rental taxes instituted by the State of Washington (e.g., state and local retail sales tax, special hotel/motel taxes, convention and trade center taxes). If you use an entity to manage your long-term/short-term or vacation rental, it is the property owner's responsibility to ensure the City B&O Tax Report is filed annually. It is best to discuss with your property management entity if they will complete City B&O tax reporting as part of their services.

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To apply for a City business license go to:

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