California Court Upholds Los Angeles Transient Tax on Short-Term Rentals

Appellate court affirms $1 million assessment against operator for unpaid occupancy taxes

Jan. 28, 2026 at 1:31pm

Got story updates? Submit your updates here. ›

The California Court of Appeals, Second Appellate District, has affirmed a trial court's judgment in favor of the City of Los Angeles regarding unpaid transient occupancy tax (TOT) assessments against a short-term rental operator. The city had assessed over $1 million in TOT, interest, and penalties against the taxpayer for operating short-term rentals in a residential building, which the court found the taxpayer failed to properly contest within the required 45-day period.

Why it matters

This ruling upholds Los Angeles' ability to enforce its transient occupancy tax on short-term rental operators, which is an important revenue source for the city as it grapples with housing affordability and displacement issues linked to the rise of vacation rentals. The decision also underscores the need for short-term rental hosts to carefully follow administrative procedures when challenging tax assessments.

The details

The dispute arose when the City of Los Angeles assessed over $1 million in TOT, interest, and penalties against the taxpayer for operating short-term rentals in a residential building. The court found that the taxpayer failed to exhaust its administrative remedies by not requesting a hearing within the required 45-day period after receiving the assessment notices. The court rejected the taxpayer's arguments that administrative review would have been futile or that its lawsuit tolled the time for contesting the assessments.

  • The City of Los Angeles assessed the over $1 million in TOT, interest, and penalties against the taxpayer.
  • The taxpayer failed to request a hearing within the required 45-day period after receiving the assessment notices.

The players

City of Los Angeles

The local government that assessed the transient occupancy tax against the short-term rental operator.

Taxpayer

The short-term rental operator that was assessed over $1 million in transient occupancy taxes, interest, and penalties by the City of Los Angeles.

Got photos? Submit your photos here. ›

The takeaway

This ruling affirms Los Angeles' ability to enforce its transient occupancy tax on short-term rental operators, underscoring the importance for hosts to carefully follow administrative procedures when challenging tax assessments. The decision highlights the ongoing tension between cities seeking to regulate the short-term rental industry and operators seeking to avoid taxes.