Lease
Airbnb. Waldo Swiegers/Bloomberg
In the quiet week after last Christmas, Governor Charlie Baker signed a bill that Airbnb and other so-called home-sharing companies had been making a lot of noise about.
The new law taxing short-term rentals aligns Massachusetts with most other states in the country. By extending the Bay State hotel tax to Airbnbs and other similar rentals, Baker says the law levels the playing field for “short-term rental operators who use their properties as de facto hotels. “.
The legislation also creates a one-of-a-kind national register for short-term rentals.
Airbnb says it is “deeply disappointed with the flawed bill” and tried unsuccessfully to persuade Baker to veto it, arguing that the legislation raised “serious concerns” for the thousands of hosts using the platform in Massachusetts.
Still, the company says it remains ‘optimistic’ about the future, even as hosts across the state would have scramble comply with the law before it comes into effect this summer.
What types of rentals are impacted by the new tax?
The law defines short-term rental as “occupied property” when at least one “room or unit is rented by an operator through the use of advance reservations.” This includes apartments, houses, cabins and condominiums.
The definition does not include hotels, motels and other lodging establishments offering lodging to guests, as well as timeshares and month-to-month leases.
“A short-term rental is a rental that does not last more than 31 consecutive calendar days,” specifies the Ministry of Revenue.
The law applies whether the owners rent the property themselves or use an intermediary, such as a broker or an accommodation platform (i.e. Airbnb, Homeaway or any other online application or website).
However, the new tax does not apply to people who rarely rent their accommodation. After negotiations between the Baker administration and state lawmakers, a compromise bill was reached to exempt people who rent their homes for 14 days or less in a calendar year.
The Republican governor said the exemption was necessary to “avoid imposing undue burdens on casual tenants.”
The tax also does not apply to rentals that cost less than $15 a night, or to service members who rent out their home or room while deployed on official orders.
How much is the tax?
The law imposes a 5.7% state excise tax on short-term rentals – the same rate that Massachusetts taxes hotels and other lodging establishments.
The law also extends other hotel tax policies to short-term rentals. Cities and towns will be allowed to impose a tax of up to 6%, with the exception of Boston, which will be allowed to tax short-term rentals at a rate of 6.5%. They would also be subject, like hotel rooms, to an increase of 2.75% convention center financing costs.
However, there are also taxes that would be unique to short-term rentals.
Cities could impose a “community impact tax” of up to 3% – of which at least 35% must be spent on affordable housing or local infrastructure projects.
Short-term rentals on Cape Cod and its offshore islands, including Martha’s Vineyard and Nantucket, will also be subject to a new 2.75% tax for the Cape Cod and Islands Water Protection Fund. The bottom was included in the bill by Cape Town lawmakers to support environmental conservation in the popular vacation destination.
Depending on the town or city, the total tax on short-term rentals could be as high as 17.45% — or 17.95% in Boston — if authorities decide to max out their local tax and community impact fee.
The tax will apply to the total rent paid by customers, which includes utilities, cleaning and other charges.
When does this take effect?
The new tax applies to rentals beginning July 1 that were booked on January 1 or later.
So if you booked an Airbnb rental last December for a trip to Boston next August, the purchase would not be subject to the new tax. But if you made the same rental this week, the tax would apply.
Individual rentals that begin in June (regardless of booking date) and end in July are not subject to the tax.
What else does the bill do?
That’s barely all the taxes.
The new law also requires owners of short-term rentals and “intermediaries,” like Airbnb, to register with the Department of Revenue, making Massachusetts the first state in the nation to establish such a nationwide registry. ‘State. Even owners who rent out their property less than 14 days a year are required to register with the state.
Operators will also be required to carry liability insurance of at least $1 million to cover each rental, beginning July 1.
The law states that the registry will be accessible to the public and directs the Executive Office of Housing and Economic Development to hold hearings and study existing practices in peer states as it develops regulations for the registry.
The Revenue Department said it plans to release more information and guidance on the law – including the registration and collection process – in the “near future”.
As Massachusetts would become the first state to do so, a number of cities in the world and across the country — including San Francisco, Seattle and New Orleans — have created short-term rental registries.
Boston started requiring short-term rental operators to register with the city on January 1 as part of a strict new law passed last year to curb the industry and solve the local housing crisis. However, the city agreed to delay its execution new rules following a complaint filed by Airbnb above the law.
Comments are closed.