How to Start a Vacation Rental in Key West

Key West is one of the most tightly regulated short-term rental markets in Florida. A house on the island can become a legal key west vacation rental, but the permits stack on top of each other. Inside city limits you need a city transient rental license, a city Business Tax Receipt, a license from the Florida Department of Business and Professional Regulation (DBPR), and a Monroe County Business Tax Receipt. The property also has to sit in a zone where transient use is allowed. Miss one step and you can end up with a booking calendar you cannot legally use.

This guide walks through the process in the order most owners should handle it. It covers the key west short term rental rules inside Key West, the separate rules that apply in unincorporated Monroe County, and the Florida business filings and tax registrations that every owner needs before the first guest checks in.

Informational content only. This article is not legal, tax, or zoning advice. Rules, fees, and procedures change, and the City of Key West, Monroe County, DBPR, and the Florida Department of Revenue make the final decisions on your property. Speak with a Florida attorney and a CPA before you buy a property, sign a lease, or publish a listing, and confirm every figure below with the agency named.

What You Need Before You Start

Gather these items before you file anything. Most delays happen because an owner starts an application without the address, zoning answer, or entity documents the agency asks for. Having everything in one folder also makes the later steps faster.

• The exact street address and parcel number, so you know whether the property sits inside Key West city limits or in unincorporated Monroe County.
• A written zoning answer from the local planning office for that parcel. A verbal answer from a real estate agent is not enough.
• A Florida LLC, or another business entity you have chosen with a CPA or attorney.
• A federal employer identification number (EIN) from the IRS, which you can obtain directly from the IRS at no charge.
• A registered agent with a physical Florida street address. A P.O. Box will not work.
• A business bank account and a bookkeeping system that keeps rental income separate from personal money.
• A property insurance quote that specifically covers short-term rental use. A standard homeowner policy written for a primary residence may not.
• Written house rules, a guest registration process, and a plan for collecting and remitting tax on every booking.
• A budget for filing fees, license fees, and permit fees, plus reserve cash for the weeks it can take to finish inspections and approvals. Confirm current processing times with each agency, since timelines vary.

Step 1: Confirm Where the Property Sits

Key West is a city, but much of Monroe County lies outside city limits, and the rules differ depending on which side of the line the property falls. Start by checking the address against the City of Key West and Monroe County maps. Then ask the right office for a written answer. If you are buying, make your purchase contract contingent on the zoning answer so you can walk away if the answer is unfavorable.

The two paths look like this:

• Inside Key West city limits: the city treats rentals of 28 days or less as transient. You need a city transient rental license, a city Business Tax Receipt, a DBPR license, and a Monroe County Business Tax Receipt.
• Unincorporated Monroe County: rentals under 28 days need an annual special vacation rental permit ($1,040) and a licensed vacation rental manager ($340). Short-term rentals are banned in the IS, IS-M, and URM zoning districts.

Step 2: Check Zoning Before You Buy or Convert

Zoning is the step that decides whether the rest of this guide matters. Key West transient units transfer only into permitted zones. That means a unit you buy in a zone that does not allow transient use may not qualify, even if the house was used as a short-term rental before you owned it.

Ask the planning staff three questions in writing. Is the parcel in a zone that permits transient use? Is the unit eligible for a transient rental license? Does the city or county currently cap or wait-list new transient licenses? Ask for the answer for this parcel, this zone, and today's date, not a general answer about the neighborhood.

Many owners assume that a past rental history carries over automatically. Do not rely on that assumption. Eligibility depends on the parcel and the zone, and the rules can change between the seller's use and your application.

Step 3: Form Your Florida LLC

Most owners hold the rental in a Florida limited liability company (LLC). The Florida Department of State, Division of Corporations, handles formation through Sunbiz at the Sunbiz eFile page for Florida LLCs. The required fee for Articles of Organization is $125, which is the $100 filing fee plus the $25 registered agent designation. Your LLC name must end with Limited Liability Company, LLC, or L.L.C., and it must be distinguishable on state records. Do not assume a name is available until you receive a filing acknowledgment. A name reservation costs $25 and holds the name for 120 days.

You must designate a registered agent with a physical Florida street address. The registered agent designation costs $25 for an LLC, and changing the agent later costs the same amount. An LLC cannot serve as its own registered agent, though an individual owner can.

Once formed, the LLC files an annual report each year between January 1 and May 1. The annual report fee is $138.75. A $400 late fee applies to reports received after May 1, bringing the total to $538.75. Failure to file by the third Friday in September leads to administrative dissolution. Florida has no state franchise tax and no personal income tax, but federal tax treatment depends on how the LLC is classified, so ask a CPA how your ownership structure affects your returns.

Step 4: Get an EIN and Open a Dedicated Bank Account

Apply for an EIN with the IRS and open a bank account in the LLC's name. Route every booking deposit, guest payment, cleaning fee, and collected tax through that account. Mixing personal and rental money is one of the fastest ways to weaken the liability protection an LLC provides, and it makes your tax filings far harder to prepare.

Set up your booking platform payouts to go to this account, and keep a separate ledger for taxes collected from guests. Taxes you collect are not your income, and treating them that way is a common source of trouble at filing time.

Step 5: Register a Fictitious Name If You Use a DBA

If your listings will use a name other than the exact LLC name, such as a brand name for your rental portfolio, you need a fictitious name registration with the Division of Corporations. Registration costs $50, and renewal costs $50. A registration is valid for 5 years and expires on December 31 of the fifth year. Renewal is filed between July 1 and December 31 of the expiration year. Florida also requires the name to be advertised at least once in a newspaper in the county of your principal place of business. No proof of advertisement is filed, but the requirement still applies, so do it. Register through the Sunbiz fictitious name registration page.

Step 6: Register for Sales Tax With the Department of Revenue

Rental charges for short stays are generally subject to state sales tax, and you must register as a sales and use tax dealer with the Florida Department of Revenue before you take your first booking. The state sales tax rate is 6%. Register through the Department of Revenue registration page. Ask the Department whether cleaning fees and other guest charges are taxable in your situation, and how often you must file returns.

Monroe County also levies a tourist development tax of 5% on transient rentals. Build it into your pricing and your guest checkout, and confirm with the county how it is collected and remitted. Tax on every booking is an area where a mistake becomes expensive quickly, so set up a separate tax ledger from day one.

Step 7: Apply for the City Transient Rental License and Business Tax Receipt

If your property is inside city limits, you need a city transient rental license. Key West calls this the medallion. It is a regulatory license under City Code s. 18-147, and it is tied to your city Business Tax Receipt. Apply through the City of Key West and ask for the current application checklist, fee schedule, and inspection steps. Those details change, so confirm them with the city rather than relying on an older summary.

Florida issues no general statewide business license. A Business Tax Receipt is a local tax, not proof that you are competent to run a business, and not every county or city levies one. Key West requires a city Business Tax Receipt for the address where you operate. Do not treat the receipt as approval to rent, because the medallion and the zoning determination are separate requirements that must both be satisfied.

Step 8: Obtain the DBPR License

A transient rental in Key West also requires a license from DBPR. DBPR licenses specific professions and businesses across Florida, so the first question is which license class applies to your unit. Ask DBPR what the application requires, whether an inspection comes before issuance, and how renewals are handled. Do not accept a guest reservation until the DBPR license is in hand, because operating before you are licensed creates real exposure for you and for any platform that lists the property.

Step 9: Get the Monroe County Business Tax Receipt

You also need a Monroe County Business Tax Receipt. Business Tax Receipts are issued by the local government where you operate, so the county receipt sits alongside the city receipt rather than replacing it. Ask the county office that issues Business Tax Receipts which receipt covers your address and whether you need both. Keep the receipt on file with your city documents, because platforms and inspectors will ask for proof of each one.

Step 10: If You Are in Unincorporated Monroe County

If the property sits outside city limits, the county rules apply in place of the city transient license in Step 7. Rentals under 28 days need an annual special vacation rental permit, which costs $1,040. The county also requires a licensed vacation rental manager for these rentals, at $340. Confirm the current permit terms with Monroe County, including whether the manager requirement applies to your arrangement and how both the permit and the manager requirement renew.

The county bans these short-term rentals in the IS, IS-M, and URM zoning districts. A property in any of those districts cannot host rentals under 28 days under this path, so confirm the district before you spend money on furnishings, photography, or listing setup. Also confirm with the county which of the other licenses in this guide apply to your parcel, since the city transient license and the city Business Tax Receipt do not.

Step 11: Prepare the Property and Your Insurance

Before you list, have the unit checked for the things your permits and insurer will care about: smoke and carbon monoxide detection, emergency egress, parking, trash service, and an occupancy limit that matches what the permit allows. Ask the city or county fire and building offices which inspections apply to your unit, and schedule them early, because they can take time to arrange.

Talk to your insurer about short-term rental coverage and get the answer in writing. A homeowner policy written for a primary residence may exclude paid guest stays, and a gap in coverage is one of the costliest surprises an owner can face after a guest injury or property loss.

Write house rules that match your permit. Cover occupancy, parking, noise, trash, quiet hours, and any posting requirements. Confirm with the city or county where permit and license numbers must be displayed, and post them where the local rules require.

Step 12: Launch Listings and Set a Compliance Calendar

List the property only after every license and permit has been issued. Where the local rules require a license or permit number, include it on each listing. Keep copies of every approval in one file for each property, including the zoning letter, licenses, permit numbers, tax registrations, insurance binder, and renewal dates.

Set a compliance calendar with these dates and reminders:

• January 1 to May 1: LLC annual report window. A $400 late fee applies after May 1.
• Third Friday in September: the deadline to have the LLC annual report filed before administrative dissolution.
• July 1 to December 31 of the fifth year: fictitious name renewal window, if you registered a DBA.
• On your assigned schedule: sales tax and tourist development tax filings. Confirm your filing frequency with the Department of Revenue and the county.
• Each renewal date: city, county, and DBPR renewals, with dates confirmed directly from each agency.

Common Mistakes to Avoid

• Buying first and checking zoning later. Get the zoning answer in writing before you make an offer, and make the contract contingent on it.
• Assuming past rental history transfers. The parcel, the zone, and the date control eligibility, not the seller's history.
• Listing before the permits are issued. A booking you cannot legally honor creates refunds, guest complaints, and enforcement risk.
• Running rental money through a personal account. That undermines the LLC and makes sales tax tracking harder.
• Forgetting the tourist development tax. The 5% county tax has to be collected and remitted on eligible stays, and it should be in your price from the start.
• Relying on a standard homeowner policy. Get a written answer on short-term rental coverage before your first guest arrives.
• Letting the annual report slip. The $400 late fee starts after May 1, and administrative dissolution follows if the report is not filed by the third Friday in September.

Tips for a Smoother Launch

• If you live off-island and the county path applies, identify your licensed vacation rental manager before you commit to the property, and confirm the requirement with Monroe County first.
• Keep one file per property so that the next renewal or inspection does not require a search through old email.
• Decide early whether your nightly rate will include tax or show it as a separate line, and confirm that your booking platform and your tax filings support that choice.
• Budget for slow months. Keep reserve cash for licensing fees, repairs, and the period when an agency is still processing your application.
• Ask a Florida Small Business Development Center advisor to review your business plan before you commit to the purchase. The Florida SBDC Network can help you test the numbers.

What Results to Expect

A properly licensed Key West rental may generate income, but the outcome depends on the property, the zone, your pricing, your management approach, and the season. Many owners find that demand concentrates in peak months, so your financial plan should not assume a full calendar all year. Permit limits, insurance costs, and the time required to become fully licensed can also affect the first year. A conservative plan that tracks real bookings, expenses, and tax collections will give you better information than any projection made before you open for business. No result is guaranteed, and the licensing and tax steps above are required regardless of how the property performs.

Next Steps

Start with the address and a written zoning answer, because everything else depends on that. Then form the LLC, register for sales tax, and apply for each license in the order described above, confirming each fee and timeline with the agency that issues it. For complex purchases, conversions, or multi-unit ownership, speak with a Florida attorney and a CPA before you commit money. A licensed professional who knows the Key West rules can save you from an expensive correction later.