Legislation Expanding Room Occupancy Excise to Include Short-Term Rentals and Provide New Rules for
Legislation Expanding Room Occupancy Excise to Include Short-Term Rentals and Provide New Rules for Traditional Lodging is Effective July 1, 2019
We are following up on communications we began in February to remind you that collection of taxes on short-term rentals begins July 1, 2019. That is also the date that traditional lodging accommodations will begin implementing new rules detailed in the recent legislation.
IMPACT ON SHORT-TERM RENTALS
IMPACT ON TRADITIONAL LODGING ACCOMMODATIONS
- Subject to tax: Rent from short-term rentals will now be subject to room occupancy excise, including any applicable local option excise, for any agreements made on or after January 1, 2019 for occupancies beginning July 1, 2019 or after. “Rent” includes insurance, linen fees, cleaning fees and booking fees. Refundable security deposits are excluded.
- Definition of short-term rental: A short-term rental is an occupied property where at least one room or unit is rented using advance reservations – this might include an apartment, house, cottage or condominium.
- Additional fee or excise: A short-term rental may be subject to the Cape Cod and Islands Water Protection Fund excise of 2.75% in cities and towns in Massachusetts that are members of the Cape Cod and Islands Water Protection Fund. Currently. All cities and towns within Barnstable County are members. A Community Impact Fee may also be applicable in those cities and towns where it’s been adopted.
- Operator responsibilities: Operators of short-term rentals must register with MassTaxConnect on or after July 1, 2019 when registration will be available. Please don’t attempt to register before July 1. Operators who rent more than 14 days in a year, and are collecting the rent directly, must collect the excise and fee if applicable, file returns and remit the excise to the Department of Revenue. An exemption is made for single occupancies of more than 31 consecutive days.
- Intermediary responsibilities: Intermediaries who collect rent on short-term rentals are required to register on MassTaxConnect, collect all excises and fees, file returns and remit collections of excise and fees to the Department of Revenue.
Please review the frequently asked questions and the technical information release (TIR) on the Department of Revenue website for detailed information on the new law. You can also find video tutorials on how to register, file a return and pay taxes.
- Expansion of WHAT is subject to tax: There is an expansion of the term “occupancy” to include any and all furnishings, services, accommodations, like breakfast at a B&B, whether the occupant chooses to avail themselves of the services or not.
- Expansion of the AMOUNT subject to tax: There is an expansion of the term “rent” to include all optional charges like insurance, linen fees, cleaning fees, and booking fees. Excluded are refundable security deposits, amounts paid by an occupant that have already been reported by the operator as taxable gross receipts for sales or use tax purposes, and amounts paid by an occupant for services also offered by the operator to those not staying at the facility in the regular course of the operator’s business.
- New fee imposed on accommodations in Barnstable County: A new local excise of 2.75% must be collected in those cities and towns in Massachusetts that are members of the Cape Cod and Islands Water Protection Fund, currently including all Barnstable County cities and towns.
- Intermediaries will now collect and remit tax: Intermediaries who collect rent directly from customers will be required to register on MassTaxConnect and collect and remit tax to the Department of Revenue, including any applicable local option excise and Cape Code and Islands Water Protection Fund excise. Where a customer pays an operator directly, the operator will collect and remit tax even if an intermediary was otherwise involved.
Intermediaries will find more detailed information about the role of an intermediary here.
If you continue to have questions after reviewing the FAQs, video tutorials and technical information release, please contact the Trustee Tax Contact Center at 617-887-6367 (choose #4 then #3 when prompted).
PLEASE SHARE THIS INFORMATION WITH ANYONE WHO MAY BE AFFECTED BY THE NEW LEGISLATION