Overview: Are Short-Term Rentals Allowed in Cosby, TN?

Yes, short-term rentals are allowed in Cosby, TN. Based on available market data, Cosby has an active short-term rental market with approximately 700 listings generating a median revenue of $27,637. However, it appears that Cosby operates under Tennessee state-level regulations without specific city-imposed restrictions, making it a more investor-friendly environment compared to some neighboring tourist destinations with stricter local ordinances.

How to Start a Short-Term Rental Business in Cosby, TN

Launching a short-term rental business in Cosby requires following both state and county regulations. Given Cosby's rural location and tourism proximity to major attractions like Gatlinburg and Pigeon Forge, the process involves standard Tennessee state requirements without the complex city-level restrictions found in more regulated markets.

Initial Steps:

1. Property Due Diligence: Verify zoning compliance and property suitability for STR use
2. Business License Acquisition: Obtain both county and city business licenses
3. State Compliance: Ensure compliance with Tennessee Short-Term Rental Unit Act (SB1086)
4. Insurance Setup: Secure required liability coverage
5. Local Authority Engagement: Connect with Sevier County officials for guidance

Required Documents, Permits, Licenses, and Guidelines

State-Level Requirements (Tennessee SB1086):

Business Licenses:

• County business license
• City business license
• Both typically available for approximately $15 each

Short-Term Rental Documentation:

• Personal ID (government-issued)
• Federal EIN (Employer Identification Number)
• Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
• Proof of ownership or lease agreement
• Proof of residency (if claiming owner-occupied status)
• Site plans and floor plans
• Completed affidavits as required by local authorities

Insurance Requirements:

• Liability insurance minimum of $500,000 (unless equivalent coverage provided by listing platform)
• Property insurance covering fire, hazard, and liability risks

Safety Compliance:

• Smoke alarms in all sleeping areas
• Carbon monoxide detectors on habitable floors
• Fire extinguishers (minimum 5-pound capacity recommended)
• Compliance with state fire safety codes

Application Process:

• Submit completed application with all required documentation
• Pay application fees (typically around $500 total for all licenses and permits)
• Schedule and pass required inspections if applicable
• Display permit/license number prominently on property

Specific Regulations for Short-Term Rentals

Tennessee State Regulations (SB1086):

Definition of STR Unit:

• Residential dwelling rented for less than 30 continuous days
• Includes single-family homes and multi-family units
• Excludes hotels, tourist courts, tourist camps, and motels

Statewide Requirements:

• Minimum $500,000 liability insurance coverage
• Fire sprinklers, smoke alarms, and carbon monoxide alarms required
• Compliance with health and safety regulations
• Registration with state authorities as required

Operating Limitations:

• Maximum occupancy typically limited to 2 guests per bedroom and 12 guests per property
• No compensation for rentals less than 24 hours
• Compliance with local zoning restrictions
• Proper waste management and noise control

County-Level Regulations (Sevier County):

As of 2024, Sevier County implemented new requirements for STRs outside city limits:

• Annual STR permit required
• Yearly safety inspection mandatory
• Safety inspection covers fire extinguishers, smoke alarms, escape routes, carbon monoxide detectors, electrical safety, grill safety, and stair handrails

Tax Requirements:

Occupancy Taxes:

• County lodging tax: 3% in Sevier County
• Additional local occupancy taxes may apply

Sales Taxes:

• Combined sales tax: 9.75% total (state and local)
• Hosts responsible for collecting and remitting applicable taxes

Income Taxes:

• Federal income tax on rental income
• Tennessee state income tax
• Eligibility for business expense deductions including depreciation, mortgage interest, property taxes, insurance, furnishing costs, and management fees

Local Considerations for Cosby:

Unlike neighboring tourist destinations (Gatlinburg, Pigeon Forge, Sevierville) which have implemented stricter local ordinances, Cosby appears to operate under more flexible state-level regulations. This creates an investment environment with fewer restrictions but still requires compliance with Tennessee's established STR framework.

Contact Information for Local Authority

Sevier County Government:

County Mayor's Office

• Phone: (865) 453-5502
• Address: 125 Court Avenue, Suite 201, Sevierville, TN 37862
• Website: seviercountytn.gov

County Trustee (Tax Collection)

• Phone: (865) 453-5521
• Website: seviorcountytn.gov (lodging tax information available)

County Building Codes

• Phone: (865) 453-5505
• Responsible for safety inspections and compliance verification

Sevier County Economic Development Council

• Phone: (865) 453-7200
• Website: scedc.com
• Resource for business licensing and economic development guidance

State-Level Contacts:

Tennessee Department of Revenue

• Phone: (615) 253-0600
• Website: tn.gov/revenue.html
• For state tax registration and compliance

Tennessee Department of Commerce and Insurance

• Phone: (615) 741-2241
• Website: tn.gov/commerce.html
• For insurance requirements and business licensing

Source Links

1. Tennessee STR Regulations Overview: www.strprofitmap.com/regulations/TN
2. Tennessee Short-Term Rental Unit Act (SB1086): www.capitol.tn.gov/Bills/110/Bill/SB1086.pdf
3. Comprehensive Tennessee STR Laws Guide: www.gosummer.com/post/tennessee-short-term-rental-laws
4. Sevier County Lodging Tax Information: www.seviercountytn.gov/government/county_officials/county_trustee/lodging_tax.php
5. Sevier County STR Inspection Program: www.seviercountytn.gov/news_detail_T2_R68.php

Investment Recommendation: Cosby presents a relatively straightforward STR investment opportunity with fewer regulatory barriers than nearby tourist destinations. While the market shows solid performance metrics, investors should factor in the area's more remote location when evaluating potential guest demographics and operational requirements. The proximity to major Smoky Mountain attractions provides tourism exposure without the regulatory complexity found in nearby cities with stricter STR ordinances.