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2018 State of Massachusetts Chapter 337

AN ACT REGULATING AND INSURING SHORT-TERM RENTALS

Updated 1/14/2019

State of Massachsetts info on the Vacation Tax – FAQs Here!

Actual Law signed by Charlie Baker Here

Applies to rentals 31 consecutive calendar days and less starting July 1, 2019

Office of the Governor Here

TAX UPDATE: 12/29/2018

The lodging tax bill was signed into law.

It stipulates that any leases signed on or after January 1, 2019, for any rental occupancy after July 1, 2019, would be subject to taxes.

What should Potential Renters do?

Sign a lease before Jan. 1 or rent before July 1st if you want to avoid the tax.

How much is the tax?

The tax will be as high as 14.45% but it varies by community. Edgartown will be 9.7%

How much deposit would the renter need to pay?

A lease isn’t an official contract until some money passes hands, but there’s no set amount. So a lease with $100 down would be sufficient to lock in your tax free rental for July 2019 and onwards.

Boston Globe Article

Governor Charlie Baker on Friday signed first-of-its-kind legislation to tax and regulate the short-term housing rental market in Massachusetts, capping years of debate over how to navigate an industry that has exploded through companies like Airbnb.

The new rules will take effect July 1 and could transform a market that spans the state, from Cape Cod summer homes to Boston apartment buildings to Western Massachusetts vacation retreats.

The bill requires every rental host to register with the state, mandates they carry insurance, and opens the potential for local taxes on top of a new state levy. A chief negotiator for the House said the goal is to register every short-term rental in the state by September, and local officials, including in Boston, say the new law will help buttress their own efforts to regulate the booming market.

But before Baker’s ink could dry, the law drew a sharp rebuke from Airbnb, which called it “flawed” and unnecessarily complex. Advocates who have closely followed the process — including Airbnb’s decision to sue in federal court to overturn Boston’s municipal regulations — warn a lawsuit against the state could also follow.

“Our administration has long supported leveling the playing field for short-term rental operators who use their properties as de facto hotels,” Baker said in a statement Friday after signing the bill. “I appreciate the Legislature’s work to reach a compromise on this bill that adopts our proposal to avoid placing undue burdens on occasional renters.”

The law followed a twisting, yearslong path through Beacon Hill, where as recently as this month its prospects for passing appeared unclear.

House and Senate lawmakers in July passed a similar bill, but Baker blocked it, saying the rules were onerous for people who rent their homes only a few nights a year.

Faced with a ticking clock — the new legislative session begins Jan. 2 — lawmakers emerged on Dec. 20 with a compromise plan, and pushed it to Baker’s desk through sparsely attended informal sessions.

Beyond requiring all hosts to register and carry insurance, it also subjects short-term rentals to the same 5.7 percent state levy now paid by hotels — but exempts people who rent their homes 14 or fewer nights a year. Officials have estimated that tax could raise at least $25 million annually.

It also would allow cities and towns to impose their own taxes of up to 6 percent, except in Boston, where it would be 6.5 percent, with occasional hosts also exempted.

Additional taxes would be levied on hosts who own multiple units. And an extra fee would also fall on units in Boston, Cambridge, and a handful of other cities that support the Massachusetts Convention Center Authority, but only after bonds are paid off on the Boston Convention & Exhibition Center in South Boston.

Some cities, including New York and San Francisco, have used short-term rental registries to rein in the industry, but this law makes Massachusetts the first state to require all hosts to register. That, more than the taxes, has been the focus of debate in recent months.

Hotel industry groups and housing advocates pushed for a comprehensive registry that would allow people to see whether their neighbors were renting a house or apartment short-term. Cambridge and Boston, meanwhile, have passed regulatory regimes of their own but say a statewide registry would aid enforcement, which in Cambridge has been hampered by hosts not signing up.

The new law will list the community and street name on the registry, but not specific addresses. Cities and towns, though, could choose to publish full addresses.

“This is a tremendous victory for municipal leaders,” said Paul Sacco, president and CEO of the Massachusetts Lodging Association. “By adopting a more level playing field between short-term rentals and traditional lodgers, lawmakers made great strides toward a more fair and sensible system.”

Airbnb, however, has pushed back on the measure, saying the registry could put hosts’ privacy at risk. Andrew Kalloch, the company’s head of public policy for Massachusetts, also criticized its tax structure as overly complicated and “layered,” and warned it could hinder the platform’s ability to accurately collect the levies.

“Massachusetts has chosen a pathway here that nobody else in the country has chosen,” Kalloch said Friday. “Sometimes first in the nation is bad because it means . . . what you have chosen to pass is a flawed measure.”

Kalloch said he couldn’t say whether the company would challenge the law in court, as it has done for Boston’s new rules, which are slated to go in effect Jan. 1. Airbnb is claiming that Boston’s regulations requiring online rental platforms to police their listings and share user information with the city violate state and federal laws.

But others say it’s possible, if not likely, that the new law draws litigation.

“I think it’s just a matter of time,” said Ford Cavallari, chairman of the Alliance of Downtown Civic Organizations, which supports the measure.

Requiring all hosts to register, Cavallari said, “is the light of transparency. I think Airbnb is going to have a better business because of it.”

Boston City Councilor Michelle Wu said the state’s decision to create a registry should bolster the city’s own plans to “ensure compliance.”

Tim Logan of the Globe staff contributed to this report. Reach Matt Stout at matt.stout@globe.com.

 

This information from one of our local realtors.

Summary: Book before November 1st for as much as a 15% rental increase

UPDATE: Due to the politics of this issue and the elections it looks like the vacation tax might be delayed. You are still encouraged to book your vacations as soon as you can. You never know if they might postdate the taxes effective date. Here is a link to the latest information that we have. HERE

  
We heard from quite a few of our landlord clients yesterday and today, after we sent around an email talking about the new short term vacation rental tax that is coming to Massachusetts in 2019, and how you might want to factor that into any 2019 rate changes. 
Many of you have questions. We’ll answer the ones we can, where there is a clear answer. But understand, there is still a lot up in the air. Literally right now, Governor Baker and the state legislature are negotiating on a several key points, and until they reach agreement, the details and fine print are subject to change. SHORT TERM VACATION RENTAL TAX Q&A

  1. What is considered a Short Term Vacation Rental? The tax would apply to rentals of 31 days or less.
  2. Who pays the tax? The new tax will be paid by the rental customer. It becomes a line item fee on a lease, just like the sales or lodging tax would be on a hotel bill. The customer pays it, not the landlord.
  3. Who collects the tax? If you rent your home thru Point B, we collect the tax as part of our lease process (which will include state, local, and possible regional taxes). We have a very sophisticated new property management system that automates the tax collection and processing for us and for you. If you also rent your home on your own, you will be responsible for collecting and reporting the tax separately.
  4. When does the new tax begin? The current plan puts the new tax will into effect for 2019. Leases for 2019, signed before November 1, 2018, would not
    be subject to the new tax, but all others after that date will be.
    Given the current delays in the final negotiations between the governor
    and the legislature, Ryan Castle, the CEO of the Cape and Islands Association of Realtors, told us yesterday, it
    is unclear if the November 1st timeline will stay in place or not.
    However, both sides agree they want the tax in place for 2019. It is
    always possible they won’t reach a compromise but it is expected.
  5. What will the new tax rate be? It
    will depend on the final decisions AND it will depend where your
    property is located on the Vineyard. Here are some of the variables. The
    state rate is already set at 5.7%. Local towns can add up to 6%. And on
    the Cape and Islands, there is an additional 2.75% waste water tax. And
    there is another “community impact fee” of 3%, that towns could levy on
    homeowners, who own two or more short term rental properties. Some of the caveats.
    Towns have to opt in for waste water tax, and the 3% tax on owning two
    or more rental homes. There is reportedly some push back on these. It’s
    also not yet known, what local tax level our island towns would set, but
    if we look at the current lodging/rooms tax (that hotels pay),
    Edgartown is 4%, Oak Bluffs and Vineyard Haven are 6%, and Chilmark is
    4%. Final rates are still to be set.
  6. Liability Insurance Requirement.
    All short term vacation rental homeowners will be required to carry not
    less than $1 million of liability coverage for each stay. 
  7. Required Registration With The State. There
    will be a required online state registry for all short term vacation
    rental homes. There is no statewide inspection requirement but towns may
    require licensing and/or inspections, and can set other rules for
    vacation rentals.

Right now, that’s all we know. Bottom
line, rental customers next year on the Vineyard are going to see
substantially higher overall rental costs, which could jump anywhere
from 10% – 15+% more than this year
. This is why we have recommended to many of our landlord clients to hold off on big rate increases for now.


Of
course, eventually, it will all even out in the rental equation. Most
other destinations already have similar taxes in place. But it’s that
first year when the big jump comes, that causes the sticker shock.