Governor Baker signed into law a bill regulating and taxing short-term rentals. The timeline for implementation of the law will pose significant challenges for Realtors® conducting short-term rentals in 2019.
We have assembled a detailed chart highlighting the components of the law as well as some Frequently Asked Questions. In addition, we have added new forms and updated the Massachusetts Association of REALTORS’ Short-Term Rental Lease. CCIAOR will discontinue the use of their short-term rental lease and all real estate brokerages that were using that are encouraged to move to the MAR lease.
See Full Article: https://www.cciaor.com/shorttermrentals/
|EFFECTIVE DATE||For stays starting July 1, 2019 that are booked January 1, 2019 or later. If a lease was signed prior to January 1st, no tax is due.|
|REGISTRATION||Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.|
|DURATION OF STAY||For any stays of 31 days or less
*Tenancy at will exempted
|TAX RATE||State Tax: 5.7% (Note: the law says 5%, but a 1964 law amended the state amount to 5.7% from 5%)Local Tax: up to 6% (Click HERE for a list of the current tax rate in each town)Cape Cod & Islands Water Protection Fund: 2.75%
*Every town in Barnstable County are automatically opted in; their legislative body can opt out with a 2/3rds vote. Towns in both Dukes and Nantucket counties are NOT automatically opted in to this fee.*
Community Impact Fee: up to 3%
|TAX COLLECTION & REMITTANCE||The law requires whoever collects payment for the rental to collect the tax and remit it to the Commonwealth. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department.The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year. This will be addressed in subsequent Department of Revenue regulations.|
|INSURANCE||Every home owner that rents out their property must carry not less than $1 million of liability coverage for each stay unless the hosting platform provides equal or greater coverage. Coverage shall defend and indemnify the operator and any tenants or owners in the building for bodily injury and property damage arising from the short-term rental. However, if the hosting platform (the real estate brokerage, HomeAway, Airbnb, etc.) can elect to provide the coverage for their properties on behalf of the owner.Real estate brokerages, acting as hosting platforms and intermediaries, have to provide notice to the owner of the insurance requirement. The Massachusetts Association of REALTORS has created an Insurance Disclosure form for REALTORS to use with the owners of properties they handle short-term rentals for to disclose the insurance requirement. The best practice is to get every homeowner to sign this disclosure.|
|Exemptions||The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration and these properties must file a notice with the Department of Regulation saying they will only rent for less than 14 days and will be responsible for paying the taxes themselves if rented for more than 14 days and did not collect it for the first 14 days. A real estate brokerage can use this 14-day Disclosure Form for any owner intending to rent their property for less than 14 days per year.|
|INSPECTIONS & ADDITIONAL REGULATIONS||Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.|
Current Rooms Tax Rates for Short-Term Rentals per Town:
Frequently Asked Questions:
When will this law take effect?
For all stays that start July 1, 2019 if a lease is entered into after January 1, 2019.
What do I collect taxes on, i.e. cleaning fees, booking fees, etc?
The tax is imposed on the total amount of rent. ‘Rent’ is defined as the ‘total consideration paid by or on behalf of an occupant, including any service, cleaning or other charge.’ Refundable fees are not considered consideration and would not be taxed. If the charge is for outside of consideration of rent, i.e. Steamship Authority tickets, whale watching tours, etc., that to would not be considered part of consideration for the stay and not taxed.
How do I register as an operator for short-term rentals to remit the taxes I collect?
You will pay the taxes using MassTaxConnect. DOR is currently working on making changes to the registration process due to the new law. Check this page for more information in the near future.
How do you register a short-term rental with the Department of Revenue?
The Department of Revenue is currently working on the registration process due to the new law. You can check their page HERE for updates on the registration process.
Where do I remit the taxes to?
The state portion, the local option, and the Cape & Islands Water Protection Fund will be remitted through MassTaxConnect. Room occupancy returns currently are due monthly, on or before the 20th day of the month reporting tax collected for the previous month; however, the law requires the Department of Revenue to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year.. The Department of Revenue is currently working on making changes to the forms due to the new law.
What does this new law require?
The new law expands the state’s hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). Massachusetts is one of the last states to adopt this type of tax. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, personal, or business use. At the insistence of MAR, the new law only applies to short-term rentals, meaning ordinary tenancies, such as an annual lease or a tenancy-at-will, are not covered by this bill.
Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration and must file paperwork with the state that says the property is not rented out for more than 14 days and if it is, the owner is responsible for the taxes.
What about the 2019 rentals I already booked?
The law exempts from tax any 2019 rental that is booked on or before December 31, 2018. Rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019.
Do I need to collect the tax?
Most likely, yes. The law requires intermediaries (which includes Realtors® who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department. This also means that a Realtor® who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax.
Do I need to carry insurance for the listed properties?
No. Although part of earlier versions of the legislation, the final law does not include a requirement that Realtors® provide any liability insurance for listed properties. This requirement was removed due to the advocacy of MAR. Owners, however, are required to maintain $1 million dollars in liability insurance to cover each short-term rental. Realtors® should be sure to confirm that any property they list for rent is properly insured by the owner. The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors® may elect to offer insurance coverage as part of their services but are not required to.
Before offering a property for short-term rentals, a hosting platform (including Realtors®) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental.
Do the properties need to be registered with the state or city/town?
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.
Are there any inspections required?
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.
When and how could the Nantucket and the towns in Dukes County opt into the 2.75% Cape Cod & Islands Water Protection Fund (CCIWP)?
According to Senator Julian Cyr’s staff, there is no select board or legislative body vote required in the law by a Nantucket or Dukes County municipality to opt in and start the 2.75% excise tax for their town. The key piece is the suitable equivalent plan approved by Department of Environmental Protection (DEP). DEP will determine what that suitable equivalent is for membership in the CCIWPF, and criteria for what will need to be in a plan in order to meet their approval. So towns/town managers will have to actively seek approval from DEP and submit a new plan to them in order to join the CCIWPF board and activate the excise within their town. It is thought that a Select Board for such a town seeking that would take a vote to approve sending such a plan to DEP for approval
It is important to note, that whatever existing wastewater related DEP plans some of the Dukes County towns have, no town within Dukes County or Nantucket county is part of the CCIWPF yet, because DEP has not yet announced guidelines for what they’re looking for for a suitable equivalent plan, according to Senator Cyr’s staff.
What are some best practices I can apply as the new law gets implemented?
Realtors® would be wise to disclose to prospective renters that any booking made on or after January 1, 2019 may be subject to a tax and that the tax rate may change before the rental period. Realtors® may want to postpone the collection of rent until the community tax rates are finalized.
Develop a policy to verify the number of units owned by each client in a municipality and that those units are properly insured.