The Commonwealth of Massachusetts’ new short term rental tax was passed into law the last week of December, 2018 – applying a sales tax to short term rentals, creating a C&I Water Protection Fund, mandating a state-wide registry of short term rental units as well as enabling options for more stringent municipal oversight and governance.
Beginning on July 1, 2019, a new tax will be assessed on short term rentals. This tax is levied at the same rate as the traditional room occupancy tax and applies to any stay beginning on or after that date (unless the rental contract was executed before January 1, 2019). Payments to the MA Dept. of Revenue will be required monthly.
The tax amounts are as follows:
- State excise 5.7% (Note that while the statute provides for a 5% rate, an uncodified surtax adds .7% to the rate)
- Local option excise 0-6.5% (the rate varies depending on the city or town) Visit the Division of Local Service’s Municipal Databank.
- Convention Center Finance fee 2.75% (only for Boston, Worcester, Cambridge, Springfield, West Springfield, and Chicopee)
- Cape Cod and Islands Water Protection Fund excise 2.75% (only for those cities and towns in those localities that are currently a member of the Fund)
- Community Impact fee 0-3% (the rate will vary depending on whether a city or town votes to adopt this fee)
What constitutes “Rent”
- The total amount of rent that is subject to tax includes all amounts paid by an occupant to an operator or intermediary, even if not required for occupancy. Rent includes all optional charges, including but not limited to the following: insurance, linen fees, cleaning fees, service charges.
Registration will be required with MA Dept. of Revenue, and details are found here.
New regulations for registration of short-term rentals are to be released on or by September 30, 2019 from the Executive Office of Housing & Economic Development. Each municipality may also regulate the existence or location of short term rentals, require health and safety inspections, and to post information regarding fire, extinguishers, gas shut off valves, fire exits and fire alarms.
The Cape & Islands Association of Realtors has issued this guidance for homeowners and managers of short term rentals: https://www.cciaor.com/shorttermrentals/.
Cape Cod & Islands Water Protection Trust Fund
The law included a new trust fund to pay for Cape Cod’s wastewater management. This must be collected by ALL accommodations, including those who have been collecting the local and state occupancy tax.
This Cape Cod & Islands Water Protection Trust Fund collections begin with every guest stay ON OR AFTER July 1, 2019 unless the rental contract was executed before January 1, 2019. The Trust Fund fee is 2.75%. It is paid to the DOR each month, along with your occupancy tax, in the same manner and at the same time.
The Water Protection Trust Fund was established in order help pay for wastewater management. Only the Cape & Island municipalities can access this fund. *Currently, this applies only to Barnstable County, but may be adopted by the islands in the near future.