Memphis Short-Term Rental Laws: What Out-of-State Investors Must Know in 2026

Memphis Short-Term Rental Laws: What Out-of-State Investors Must Know in 2026

Most out-of-state investors who buy a Memphis short-term rental find out about the laws after they've already closed. That's the wrong order.

I get calls every month from owners in California, Illinois, and New York who closed on a Memphis house, listed it on Airbnb, and got flagged by the city within weeks. Sometimes it's a stop notice. Sometimes it's a fine. Sometimes the listing just gets pulled.

None of it is hard to comply with. But you have to know the rules exist before you can follow them, and Memphis short-term rental laws don't get covered honestly in most "buy in Memphis!" pitches.

Here's the framework.

Tennessee Sets the Floor. Memphis Sets the Rules.

Tennessee's Short-Term Rental Unit Act, passed in 2018, limits how aggressively cities can restrict STRs. Cities can't ban STRs outright if the property was operating legally before the local ordinance, and the state preempts certain forms of restriction. That's the floor.

Above the floor, Memphis has its own ordinance: Memphis City Code Chapter 5-44, which requires a permit for every short-term rental in the city and gives properties operating before it took effect a potential grandfathering path (our Memphis STR permit guide covers both). And it actually has more teeth than most out-of-state investors expect.

Memphis distinguishes between two categories of operator:

• Non-owner-occupied STRs (the investor model, you don't live there, you rent it full-time)

The good news: Memphis allows non-owner-occupied STRs. There's no citywide cap on the number of permits. That sounds obvious until you remember that Nashville restricts non-owner-occupied STRs in residential zones. Memphis doesn't.

The catch: every property has to be permitted. Every year. With inspections. And if you're operating without a permit, the city will find out.

The Permit Isn't Optional and It Isn't Fast

You apply through the City of Memphis. The application requires:

1. Proof of ownership (deed)2. Liability insurance documentation (the standard for STR permits is at least $1M)3. A property inspection4. An emergency contact who can be on-site within a defined response window5. A floor plan showing exits and bedroom count6. The annual permit fee

Out-of-state investors get tripped up on item #4 most often. The city wants a real local contact, not a 1-800 number routing through your platform's call center. If you don't have that contact, your application doesn't move.

This is where having a Memphis-based short-term rental manager matters operationally and legally. Whoever manages your Memphis STR is functionally that emergency contact.

Taxes: Less Burden Than You Think (If You Book Through Airbnb or Vrbo)

Here's the part that gets miscommunicated everywhere, including by people writing about Memphis short-term rental laws.

If you're listing on Airbnb or Vrbo in Memphis, the platform collects and remits the major transactional taxes for you:

• Tennessee state sales tax (7%)
• Shelby County local sales tax
• Memphis local occupancy/hotel-motel tax

Airbnb has had a tax remittance agreement with Tennessee since 2018 and with Memphis specifically since 2017. The 2021 statewide centralized collection law expanded what platforms collect on hosts' behalf. Vrbo operates the same way as a registered marketplace facilitator in Tennessee. For bookings made through Airbnb or Vrbo in Memphis, the platform handles essentially all the transactional taxes a guest pays.

What you still have to do:

1. Separate lodging tax accounts only if you take direct bookings. When every booking comes through Airbnb or Vrbo, the platform collects and remits the state, county and city lodging taxes, so you generally do not need your own sales tax or room occupancy tax accounts. Take a direct booking and you need them: a Tennessee sales tax account (TNTAP), Shelby County room occupancy tax and the City of Memphis hotel-motel tax. Our permit guide lists each one.2. Your Memphis short-term rental permit under City Code Chapter 5-44, which the platforms do not handle for you.3. Tennessee business tax. Applies once your STR revenue clears certain thresholds. Separate from sales tax. Separate from your federal income tax filing.4. Use tax on supplies bought out of state. If you furnished the property by ordering from an out-of-state vendor that didn't charge TN sales tax, you owe use tax on those purchases.5. Other sites and direct bookings change the picture. Airbnb and Vrbo both collect and remit the full Tennessee, Shelby County and Memphis tax stack on their bookings. Direct bookings have zero platform involvement. If you take direct reservations or list on a site that does not collect for you, you become responsible for every tax layer on those bookings.

LPS lists every short-term home we manage on Airbnb, Vrbo, Booking.com, Expedia and Google through Hostaway, our channel manager, from one synced calendar. More sites means more tax paths, so confirm what each platform collects before your first booking on it. If you self-manage across several sites or stand up your own direct booking site, the compliance burden materially changes. Verify current registration

requirements with the City of Memphis and the TN Department of Revenue before your first booking.

LLC Ownership Is Allowed, But There's a Wrinkle

Most out-of-state investors hold Memphis property in an LLC for liability protection. Standard, and Memphis allows it.

What out-of-state investors miss: an LLC formed in another state has to register with the Tennessee Secretary of State as a foreign LLC. That registration is annual. If you let it lapse, you can't enforce a contract in Tennessee courts. Including your lease. Including your eviction.

The permit and the insurance both need to be in the LLC's name if the LLC owns the property. If the LLC owns the house but the permit is in your personal name, that's a paperwork mismatch the city can flag.

Talk to a Memphis closing attorney about getting the registration set up correctly at closing. Tennessee allows attorney closings, and that's the better path for out-of-state buyers anyway. Use a closing attorney to handle title and the closing itself, not a title-only company.

Enforcement Is Real. So Is the Complaint Workflow.

Memphis has a 311 complaint system that routes neighbor complaints about STRs directly to code enforcement. One complaint doesn't get you fined. A pattern does.

What gets you flagged fastest:

• Parties (noise complaints, parking complaints)
• Trash on collection day, or worse, off collection day
• Operating without the permit number visible on the listing

The fix is operational, not legal. A 25% guest screening rejection rate, like LPS runs, exists specifically because the wrong guest in a Memphis STR can cost you the permit. Not just the booking. The permit.

If you're managing remotely and you can't respond to a 9pm noise complaint within 30 minutes, you have a structural problem. That's why the city requires a real local emergency contact.

What Out-of-State Investors Should Do Before They Close

Three things, in order:

1. Verify the property's zoning permits non-owner-occupied STR use. Most Memphis residential zones do. Some don't. The seller's agent isn't obligated to know.2. Budget the full permit, inspection, and insurance stack into your underwriting. Your investment math changes when you include the $1M policy and the annual permit cycle.3. Line up a local manager or local emergency contact before closing, not after. You can't apply for the permit without one. Operating without a permit while you sort it out is a fine waiting to happen.

The Memphis short-term rental market still works for out-of-state investors. The demand drivers (FedEx, St. Jude, University of Memphis, growing tech investment around xAI) are real, and Memphis works as an investment market when you operate it correctly.

But the legal layer isn't an afterthought. Get it right at the front end.

If you're closing on a Memphis property and you want a straight conversation about the regulatory side before you list, email me at andrew@staywithlps.com.

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