If you are buying a short-term rental inside Sedona city limits, the rules are clear but strict. Here is what applies in 2026, from the perspective of a buyer and an operator. We run five rentals of our own in the Verde Valley, so this is the checklist we actually use.
1. State law sets the floor
Arizona’s 2016 law (SB1350, now A.R.S. 9-500.38) says cities cannot prohibit short-term rentals or regulate them by classification or occupancy. A 2022 follow-up (SB1168, A.R.S. 9-500.39) lets cities require a local permit (fee capped at $250), an emergency contact, neighbor notice, liability insurance, and escalating penalties. Your Arizona TPT license number must appear on every ad.
Every operator also needs a transaction privilege tax (TPT) license from the Arizona Department of Revenue and must register the rental with the county assessor.
2. Sedona’s permit requirements
Under Sedona City Code Chapter 5.25, you need:
- An annual $210 permit per advertised unit. Since December 2024, a main house and a casita each need their own permit.
- Your TPT license first, then the permit application.
- $500,000 aggregate liability insurance.
- Neighbor notification by certified mail or hand delivery.
- The permit number on every listing, and a posted safety and noise notice in the home.
- A sex-offender background check on the booking guest 24 hours before check-in, with records kept for 12 months.
- No special events: no weddings, retreats, or workshops.
Violations can lead to fines and permit suspension of up to a year. Rentals of 30 days or more don’t need a permit.
3. Permits don’t transfer with the house
This catches buyers off guard. A seller’s permit does not transfer at closing, so you apply for your own. Plan for it in your timeline, especially if the home comes with future bookings.
4. Casitas and ADUs need extra care
Each rented unit needs its own permit, and newer detached ADUs face additional limits. Secondary reporting says that since September 2024, newer detached ADUs may only be rented short-term when the owner lives full-time in the main house. Check the specific structure against the city’s ADU compliance flowchart before you count on casita income.
5. Taxes
The combined lodging tax is about 13.325% on the Yavapai side of Sedona and 13.90% on the Coconino side. Airbnb collects and remits on its bookings, but you still hold a license and report. Use our STR return calculator with the Sedona preset to see how it affects net income.
6. What could change
Bills to let smaller towns cap permits or require spacing between rentals (SB1076, HB2429) have been introduced; HB2429 passed the Arizona House in March 2026. Sedona has also pushed for voters to decide on local STR regulation, possibly on the 2028 ballot. We track these on our STR rules hub.
The buyer’s checklist
- Confirm the parcel is inside city limits, and which county side.
- Read HOA or CC&R rental restrictions.
- Confirm every rented space is a permitted dwelling.
- Budget for insurance, background checks, and taxes.
- Plan the permit application into closing.
Want a second set of eyes on a listing? Request a free pre-purchase STR review, or see how Sedona compares in the Sedona area guide.
General information, not legal or tax advice. Confirm current requirements with the City of Sedona and the Arizona Department of Revenue.
Frequently asked questions
How much is a Sedona short-term rental permit?
$210 per advertised unit per year, with late fees of $50 or $100 since January 1, 2026. You need an Arizona TPT license before you apply.
Can Sedona ban Airbnbs?
Not under current state law. A.R.S. 9-500.38 prevents Arizona cities from prohibiting short-term rentals. Sedona can require permits, insurance, and other safety rules, and lawmakers continue to debate bills that would allow caps.
What is the lodging tax on a Sedona short-term rental?
About 13.325% combined on the Yavapai County side of Sedona and about 13.90% on the Coconino County side. Airbnb collects and remits on its bookings, but you still hold a TPT license and file.