Assigned to COM FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
FACT SHEET FOR S.B. 1168
vacation rentals; short-term rentals; enforcement
Purpose
Allows a city, town or county (local government) to regulate a vacation or short-term rental
by requiring an owner to maintain liability insurance. Caps the civil penalties imposed for a
verified violation. Allows the Arizona Department of Revenue (ADOR) to suspend a vacation or
short-term rental owner's transaction privilege tax (TPT) license.
Background
A local government may not restrict the use of or regulate a vacation or short-term rental
based on its classification, use or occupancy, except to: 1) protect the public's health and safety;
2) adopt and enforce residential use and zoning ordinances, including ordinances related to noise,
protection of welfare, property maintenance and other nuisance issues; and 3) limit or prohibit the
use of a vacation or short-term rental for specified purposes. A local government residential use
and zoning ordinance must be applied to a vacation or short-term rental in the same manner as
other class 3 and class 4 property (A.R.S. §§ 9-500.39 and 11-269.17).
A vacation or short-term rental owner or online lodging operator must pay a civil penalty
for a verified violation of the prohibition on using the vacation or short-term rental for
nonresidential uses or of state law or local ordinance regulating a vacation or short-term rental. If
the local government did not impose a civil penalty, a vacation or short-term rental owner or online
lodging operator must pay: 1) $500 for the first verified violation; 2) $1,000 for a second verified
violation within 12 months on the same property; and 3) the greater of $1,500 or 50 percent of the
gross monthly revenues for the month in which the violation occurs for a third or subsequent
violation within 12 months on the same property. If the local government imposed a civil penalty,
the vacation or short-term rental owner or online lodging operator must pay the difference between
the statutory amount and the amount of the civil penalty the local government imposed (A.R.S.
§ 42-1125.02).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Removes the residential use and zoning limitation on ordinances that a local government may
adopt and enforce.
2. Allows a local government to require the owner of a vacation or short-term rental to:
a) maintain liability insurance appropriate to cover the rental in the aggregate of at least
$500,000; or
b) advertise and offer each rental through an online lodging marketplace that provides equal
or greater coverage. FACT SHEET
S.B. 1168
Page 2
3. Allows ADOR, after notice and hearing, to suspend for a period of one year the TPT license
of a vacation or short-term rental owner that receives three verified violations related to the
same rental within the same 12-month period.
4. Eliminates the civil penalties imposed on an online lodging operator by ADOR for a verified
violation.
5. Removes the requirement for a local government to notify ADOR and the owner of a vacation
or short-term rental regarding a verified violation.
6. Caps, at $1,000, the civil penalty a local government may impose on a vacation or
short-term rental owner for every 30 days the owner fails to provide contact information as
required by law.
7. Requires a local government to provide 30 days' notice to the owner before imposing the initial
civil penalty relating to contact information.
8. Caps the civil penalty a local government may impose against a vacation or short-term rental
owner for a verified violation as follows:
a) $500 or up to an amount equal to one night's rent for the rental as advertised on an online
lodging marketplace, whichever is greater, for the first verified violation;
b) $1,000 or an amount equal to two nights' rent for the rental as advertised on an online
lodging marketplace, whichever is greater, for the second violation in a 12-month period;
and
c) $3,500 or an amount equal to three nights' rent for the rental as advertised on an online
lodging marketplace, whichever is greater, for the third and any subsequent violation in a
12-month period.
9. Eliminates timeshares from the definition of vacation rental or short-term rental.
10. Defines terms.
11. Makes technical and conforming changes.
12. Becomes effective on the general effective date.
Prepared by Senate Research
February 7, 2022
JT/sr