Tennessee Short-Term Rental Laws (2026): State Rules, City Limits and Taxes

Short-term rentals are legal in Tennessee, cities and counties may regulate them, and the state's one firm rule is about timing: under the Short-Term Rental Unit Act of 2018, a local restriction does not apply to a property that was already operating as a short-term rental when the restriction was adopted, for as long as the same owner holds it. Whether a given house can be rented tonight therefore depends on two dates, the one on the local ordinance and the one on your first booking.

This guide is for hosts in Nashville, Memphis, Knoxville, Chattanooga and the Smokies who want the state framework explained once, with the city programs, the two-tax structure and the 2025–2026 changes laid alongside it. It is part of our state-by-state roundup. Reviewed October 13, 2026. Not legal advice; confirm with the city, the county trustee or the Department of Revenue before relying on any item.

Key facts

• The Short-Term Rental Unit Act (Tenn. Code Ann. §§ 13-7-601 to 606, effective 2018) lets local governments regulate short-term rentals but shields a unit that was in use before a restriction took effect, until it is sold, stops operating for thirty continuous months or violates a generally applicable law. Local permitting is optional under § 13-7-604(b).
• Tennessee issues no state short-term rental license or registration; permits come from the city or county, and Nashville, Knoxville, Chattanooga, Memphis, Gatlinburg and unincorporated Sevier County all require one.
• The state sales tax of 7 percent plus the local rate applies to stays under 90 days; local hotel occupancy taxes apply on top, and the Department of Revenue says a marketplace facilitator that books the stay remits both, while the owner remits for direct bookings.
• Nashville issues owner-occupied permits in residential districts but no new non-owner-occupied permits there; a permit costs $313, runs 12 months and requires a responsible party within 25 miles, per Metro Codes as reported in May 2026.
• The 2026 General Assembly adjourned April 23, 2026 without amending the Act; Chattanooga began requiring the rental certificate to be posted inside the unit on January 1, 2026, and Memphis took up a nuisance-enforcement amendment in August 2026.

Statewide rules

The Act is short, and its most-quoted clause is the grandfather provision. A local "ordinance, resolution, regulation, rule or other requirement" that prohibits or restricts short-term rental use does not apply to a property that was used as a short-term rental before the requirement was adopted. The protection follows the property and the owner together: it ends on sale or transfer, after thirty continuous months without rental use, or when the unit breaks a law that applies to everyone. A lapsed permit alone does not end it. That is why Nashville still carries non-owner-occupied permits in residential zones that no new applicant can obtain.

The clause is often misread as preemption. It is not. Cities may adopt new restrictions, zone short-term rentals out of residential districts, require permits, cap occupancy and inspect for safety, and those rules bind every property that started renting after they passed. The Act also leaves local permitting voluntary, which is why four of the five big programs look different from one another.

No statewide safety, insurance or platform data-sharing mandate exists. Insurance minimums (Nashville asks for proof of $1 million liability coverage with a permit application), floor plans, neighbor notification and on-site postings are all city-level requirements. The Legislature has periodically considered narrowing local authority and has not done so; bills reported in the 2026 session did not become law before adjournment on April 23, 2026, and the Act's text is unchanged. Verify on the General Assembly's bill lookup if you hear otherwise.

Covenants are a separate track, and Tennessee is a notable state for them. Its Supreme Court held in 2023 that a "residential purposes" covenant does not by itself bar short stays, in line with "nearly all" courts, while also indicating that a properly authorized thirty-day amendment can bind an existing owner. The distinction between what a covenant says and what an amendment can add is drawn out in what courts have actually held about short-term rentals.

Major cities and counties

Three regimes, then. Nashville and Chattanooga sort rentals by whether the owner lives there and push investor units into commercial zoning. Knoxville does the same with lighter fees. The Smokies license everyone and inspect for fire safety, because the cabin economy is the economy.

Taxes

Tennessee stacks a sales tax and an occupancy tax, and the two have different clocks. Sales tax applies to accommodations rented for less than 90 days, at the 7 percent state rate plus the local rate, on most guest charges (cancellation fees excluded). Local hotel occupancy taxes, levied by cities and counties, generally exempt stays of 30 consecutive days or more, so a 45-night guest can be free of occupancy tax and still owe sales tax.

Who remits depends on who booked. The Department of Revenue's guidance is direct: when a marketplace facilitator or a property management company books the stay, it remits the sales tax and, for short-term rentals, the local occupancy tax to the Department; when the owner rents the property directly, the owner collects and remits sales tax to the state and occupancy tax to the local official. Airbnb and Vrbo therefore cover platform bookings, and a direct booking is entirely yours: a sales tax account with the Department of Revenue, an occupancy tax account with the county trustee or city, and two filing calendars. Managing a state rate, a county rate, a city rate and an occupancy tax per property is the job Haven's tax and accounting features handle, with cited AI rate suggestions per jurisdiction.

Nashville adds a flat per-night fee on top of its occupancy tax, and Sevier County's combined sales rate is 9.5 percent; take the exact occupancy rate from Metro or the county rather than a vendor table.

What changed in 2025 and 2026

• January 1, 2026: Chattanooga began requiring the short-term vacation rental certificate to be physically posted inside the unit.
• March 2026: Memphis council members pushed for stricter rules after shootings at rentals; staff reported roughly 90 percent of the city's rentals operate without a permit.
• April 23, 2026: The 114th General Assembly adjourned sine die without amending the Short-Term Rental Unit Act.
• May 2026: Nashville's rental association pressed Metro for temporary permits ahead of the 2030 Super Bowl, given a slow approval process; permits remain $313 for 12 months.
• August 2026: Memphis took up an amendment to Ordinance 5856 treating violations as a public nuisance (second reading on the August 18 agenda); confirm whether it passed.
• 2026: Gatlinburg considered an occupancy cap of two persons per bedroom plus two; unincorporated Sevier County kept its 2024 permit regime.

How to stay compliant

1. Establish the date your property first operated as a rental and keep the evidence (listings, tax filings, permits); it is the whole grandfather defense.
2. Get the city or county permit before listing and renew on time; Chattanooga and Sevier County both tie certificates to inspections.
3. Register for sales tax with the Department of Revenue and for occupancy tax with the local official, even if every booking today comes through a platform.
4. Confirm your zoning district: Nashville, Knoxville and Chattanooga all decide non-owner-occupied eligibility by zone, not by application quality.
5. Carry the insurance your city requires and attach the certificate to the application file.
6. Post the certificate, occupancy limit, parking rule and local contact inside the unit, and list the permit number on every listing including your own website.
7. Name a responsible party who can be on site within the city's radius (Nashville: 25 miles).
8. If you sell, tell the buyer that the grandfathered status does not transfer.

FAQ

Is Airbnb legal in Tennessee?

Yes. State law allows short-term rentals and allows local regulation; whether your property qualifies depends on your city's zoning and permit rules, and on whether you were operating before any restriction was adopted.

Do I need a state license in Tennessee?

No. Tennessee has no state short-term rental license or registry. You need the local permit your city or county requires, a sales tax account with the Department of Revenue and a local occupancy tax account for direct bookings.

What taxes do I pay on a Tennessee short-term rental?

State sales tax of 7 percent plus the local rate on stays under 90 days, and a local hotel occupancy tax on stays under 30 days in most jurisdictions. Airbnb and Vrbo remit both for bookings they facilitate; you remit both for direct bookings.

Can my Tennessee city ban short-term rentals?

A city can restrict or zone out new short-term rentals, but under the 2018 Act those rules do not reach a property that was already operating when they were adopted, until it changes hands or sits idle for thirty months.

What changed in 2025 and 2026?

Nothing at the state level. The changes were local: Chattanooga's in-unit posting rule from January 1, 2026, Memphis's push toward nuisance enforcement, and Nashville's Super Bowl permit debate.

Sources

• Tennessee Department of Revenue — Taxation of short-term vacation rentals (accessed October 2026)
• Tennessee General Assembly — HB 1020 / SB 1086 (Short-Term Rental Unit Act) (accessed October 2026)
• City of Chattanooga — Short-term vacation rentals (accessed October 2026)
• City of Memphis — Regular council agenda, August 18, 2026 (accessed October 2026)
• Enterprise Community Partners — Tennessee 2026 legislative session summary (accessed October 2026)
• WSMV — Nashville residents eye short-term rentals for Super Bowl, but permit process poses challenges (accessed October 2026)
• Action News 5 — Memphis City Council pushes for stricter rules for short-term rentals (accessed October 2026)
• NASTRA — Tennessee Short Term Rental Unit Act (accessed October 2026)
• SkyRun — Sevier County short-term rental guide 2026 (accessed October 2026)