Massachusetts Considering Tax on Home Rentals

State legislators are considering taxing home rentals like other short term stay options.

Currently, all motel, hotel, guesthouse and bed and breakfast guests pay a 9.7 percent room occupancy tax, with 5.7 percent going to the state and 4 percent going to each town. The proposed legislation would expand the tax to include condominium and home rentals less than 90 days. The tax would be a local option and would require a town meeting vote for approval.

The argument frequently made by the lobby is that the tax would deter tourists from coming to Massachusetts, or more specifically Cape Cod, and that realtors fear they would be required to collect the tax.
“The bill does not require them to do that,” noted Turner.

The 9.7 percent tax is in several cases still less than what other vacation destinations in the Northeast have in place for condo rentals. For example, Vermont and Florida both have a 10 percent room tax for short-term rentals and Hawaii charges 11.47 percent.

The chance to generate much needed additional revenue for the state is very attractive in these difficult economic times, say proponents. According to Peake, a town like Chatham could receive an additional $1 million in revenue if it could tax short-term rentals.

Several Cape Cod towns plan to file home-rule legislation seeking state permission to impose the tax. Brewster and Provincetown voters already approved such action at special town meeting last fall. Eastham, Chatham and Yarmouth have already placed the question on the warrant for spring town meetings and other towns are expected to follow suit. Harwich placed an article on its Feb. 5 special town meeting warrant.

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