Overview: Are Short-Term Rentals Allowed in Prescott, AZ?

Yes. Short-term rentals—legally defined as “vacation rentals” in Prescott—are allowed within the City of Prescott when rented for 29 consecutive days or less, provided the operator complies with Prescott City Code Chapter 4-9, completes the required registration (if applicable), and holds the necessary state tax license. Prescott distinguishes between non-owner-occupied rentals in residential zoning (which require City registration and a health/safety inspection) and owner-occupied or commercial/zoned operations (which require only the Arizona Transaction Privilege Tax license).

How to Start a Short-Term Rental Business in Prescott

1. Verify zoning and intended use

• Non-owner-occupied vacation rentals in residential zoning: City registration is required in addition to the Arizona Transaction Privilege Tax (TPT) license.
• Owner-occupied rentals, properties in commercial zoning, or facilities operating as hotels/motels/bed & breakfasts: Only the Arizona TPT license is required; City vacation rental registration is not applicable under Prescott City Code Chapter 4-9.

2. Obtain the Arizona Transaction Privilege Tax (TPT) license

• Register with the Arizona Department of Revenue before any rental activity. This is mandatory regardless of whether you use an online lodging marketplace (Airbnb, VRBO, etc.) or rent directly. Use the state’s online portal to license, file, and remit taxes.

3. If City registration applies (non-owner-occupied in residential zoning):

• Complete the City’s Vacation Rental Registration application via the city’s Permit Portal.
• Pay the initial fee of $95 ($30 annual registration + $65 one-time safety inspection fee).
• Pass the required City health/safety inspection conducted by the Building Department before the City issues the registration certificate.
• Maintain compliance with Prescott City Code 4-9 operational requirements at all times.

4. Collect and remit applicable taxes

• City transaction privilege tax on gross income (see “Required Documents, Permits, Licenses, and Guidelines” below for current rates).
• Transient occupancy tax (aka “bed tax”) on rentals of 29 consecutive days or less.
• State tax on transient occupancy transactions.
• Register and report through the AZDOR online portal and follow City reporting requirements for local taxes.

5. Operate to standard

• Post required documents and rules in the unit.
• Designate and provide a 24/7 local contact person who can respond in-person within 45 minutes to complaints.
• Maintain adherence to occupancy limits, noise, trash, and neighborhood notification requirements.

Required Documents, Permits, Licenses, and Guidelines

State-Level (Arizona)

• Transaction Privilege Tax (TPT) License (Arizona Department of Revenue)
  • Required before operating any short-term rental
  • Use AZDOR’s portal for licensing, filing, and payment
  • Obtain and keep the TPT license number to complete City registration (when applicable)

City-Level (Prescott)

• Vacation Rental Registration (only for non-owner-occupied rentals in residential zoning)
  • Application through the City’s Permit Portal
  • Initial fee: $95 ($30 annual registration + $65 one-time health/safety inspection)
  • Renewal fee: $30 annually
  • City will conduct a health/safety inspection prior to certificate issuance
  • The City requires the following at application (non-exhaustive):
    • Property address
    • Owner information (and agent/representative, if any)
    • Local contact person’s name, address, and 24-hour phone number, with verification they can respond within required timeframes
    • Evidence that adjacent property owners were notified (e.g., a copy of the notification letter and mailing list)
    • Number of bedrooms
    • Applicable overnight occupancy limit
    • Valid Arizona TPT license number

Operational Requirements and Standard Conditions (Prescott City Code 4-9)

Habitability

• Recreational vehicles, motor homes, utility trailers, camp trailers, boats, and similar equipment are not permitted to be used for sleeping or habitation purposes on residentially zoned property used as a vacation rental.

Occupancy

• Maximum overnight occupancy: 2 persons (age 13+) per bedroom, plus 2 additional persons per vacation rental unit.
• The City may verify bedroom count via County Assessor or City building records or by inspection prior to issuing the registration certificate.

Local Contact Person

• A local contact person is required and must be available 24/7 and able to respond in person to the site within 45 minutes to initial or successive complaints. The local contact person is responsible for ensuring occupants do not create unreasonable noise or violate other code provisions.

Written Rental Agreement

• Before each rental, the owner/owner’s agent must enter into a written rental agreement with a responsible person that includes:
  • Responsible person’s identifying information (name, age, address, government-issued ID)
  • Terms/conditions (occupancy limits, trash, noise prohibitions)
  • Acknowledgment of responsibility for all occupants and guests
  • Provision of the City’s Good Neighbor Brochure
  • Maintain all agreements for at least 2 years and make available for inspection upon request

Neighborhood Notification

• Notify all immediately adjacent property owners (on all sides) that the property operates as a vacation rental, including the name and 24-hour telephone number of the local contact person. The City provides a template letter.

Information to Provide and Post

• Prior to occupancy and posted in a conspicuous place inside the unit:
  • Good Neighbor Brochure
  • Local contact person name and 24-hour phone number
  • Copy of the combined business license/vacation rental certificate (once issued)
  • Maximum overnight occupancy and notice that failure to conform is a violation of City Code 4-9
  • Trash pickup day and rules about leaving or storing trash/refuse outside
  • Notice that noise levels shall not exceed those described in City Code Title V, Chapter 4
  • City Code Chapter 4-9
  • Notice that occupants may be cited, fined, or evicted for disturbances or violations

Noise and Trash

• Ensure noise levels comply with City Code Title V, Chapter 4.
• Ensure trash and refuse are not left in public view except as allowed in the Municipal Code.

Enforcement and Audit

• The City may inspect and audit the vacation rental and records at any time during normal business hours.
• Violations of City Code 4-9 may result in citations, fines, and suspension or revocation of the registration certificate (especially upon third or subsequent violations within 12 months).
• Requirements are in addition to other applicable permits, licenses, and fees.

Specific Regulations: City, County, and State

City of Prescott

• Vacation rentals are defined as renting a residential dwelling or portion thereof for 29 consecutive days or less, excluding owner-occupied bedroom rentals, time-share units, and condominium hotels.
• City Code Chapter 4-9 governs vacation rentals, including registration, operational requirements, enforcement, and penalties.
• City transaction privilege tax applies to gross income from rentals. The City’s Vacation Rental Information PDF references a City lodging rate of 2% and a transient lodging rate of 3%; the City’s website currently lists the City transaction privilege tax at 2.95% and the transient occupancy (“bed”) tax at 3%. Investors should confirm the current rate prior to filing.

State of Arizona

• Arizona Transaction Privilege Tax applies to transient lodging; the state rate for transient lodging is 6.325%.
• All short-term rental owners in Arizona must hold a TPT license and file returns via AZDOR’s online portal.

County (Yavapai County)

• The provided materials do not include Yavapai County-specific short-term rental regulations beyond the reference to Assessor records for adjacent property identification in City procedures. County-level requirements may exist for other purposes (e.g., assessor records) but are not provided here.

Summary of Taxes (Current—verify any updates prior to filing)

• City Transaction Privilege (Sales) Tax: as published by the City (examples: 2% in the City’s Vacation Rental Information PDF; 2.95% on the City’s current website)
• Transient Occupancy (“Bed”) Tax: 3% for stays of 29 days or less
• State of Arizona Transient Lodging Tax: 6.325%
• Combined rate for short-term occupancy varies based on the City rate applied by the City at the time; investors should confirm totals with the City and AZDOR when filing.

Registration and Renewal Costs (Prescott)

• Initial City Vacation Rental Registration: $95 total ($30 annual registration fee + $65 one-time health/safety inspection fee)
• Annual renewal: $30

Local Authority Contacts (Prescott)

Neighborhood Services (Vacation Rentals)

• Address: 201 N. Montezuma Street, Prescott, AZ 86301
• Hours: Monday–Friday, 8:00 AM–5:00 PM
• Phone: Use the City Department Directory (linked below)
• Website: Vacation Rentals (City of Prescott)
• Citizen Inquiry Form: Available via the City’s website for questions or to request meetings

Code Compliance Division (enforcement of City Code 4-9)

• Address: City Manager’s Department, Code Compliance Division, 201 S. Cortez Street, Prescott, AZ 86303
• Phone: (928) 777-1320
• Fax: (928) 777-1255
• Email: code.compliance@prescott-az.gov

Department Directory (for general routing and contact assistance)

Online Applications and Tools

• City Permit Portal (PrescottPermits.com)
• Permit Portal Help Center
• PrescottPermits.com Login

Links to Source Pages

• City of Prescott: Vacation Rentals
• Prescott City Code Chapter 4-9: Vacation Rentals
• City Permit Portal (PrescottPermits.com)
• Permit Portal Help Center
• PrescottPermits.com Login
• Neighborhood Services: Purpose & Reporting
• Neighborhood Services: Vacation Rentals
• Neighborhood Services: Contact
• City Department Directory
• City of Prescott: Privacy Policy
• Rent Responsibly (Informational overview for Prescott, AZ STRs)

Notes for Investors

• Start with the Arizona TPT license, then complete City registration if your operation is non-owner-occupied and in residential zoning.
• Use the City’s Permit Portal for application, renewals, and communications.
• Confirm the current City transaction privilege tax rate and combined transient occupancy totals with the City and AZDOR prior to filing.
• Maintain thorough records of all bookings, guest information, and financial transactions for audits.
• Ensure your local contact person is prepared to respond within 45 minutes in person and that you post all required materials inside the unit.

If the provided materials do not cover County-level rules, Prescott investors should look to City of Prescott Chapter 4-9 for specific compliance standards and consult Yavapai County directly for any additional county-level requirements.