Massachusetts Short-Term Rental Tax

by John Schachter, EA

If you rent out property in Massachusetts on a short-term basis you have important new tax responsibilities starting July 1, 2019. Every person or company renting property to others short-term must register with the Massachusetts Department of Revenue at its Mass Tax Connect website before July 1. And every such short-term renter must collect room occupancy tax if it rents any unit more than 14 days in a year. A rental agent or website can collect the tax for you. But if they don’t you must do so.

Tax rates vary from town to town. And some cities add a variety of fees which you must collect.

Beginning July 1, 2019, those who rent out Massachusetts property on a short-term basis will need to collect room occupancy excise tax from guests if the property is rented for more than 14 days during a calendar year. This applies to rental contracts entered into on or after January 1, 2019, for rental periods beginning July 1, 2019.

A short-term rental is an occupied property that is not a hotel, motel, lodging house or bed and breakfast, where at least one room or unit is rented through advance reservations for not more than 31 days. So, if you have a vacation home that you occasionally rent out or a room in your home that you rent from time to time, you may be required to collect this tax if you rent for more than 14 days in a year. An intermediary may collect and pay on your behalf if you use a real estate broker or rental company, they may be able to take care of this for you.

Rent subject to the tax is all amounts collected from occupant including all optional charges, insurance, linen fees, cleaning fees and booking fees. Excluded form rent are security deposits and any service offered by the operator on similar terms to non-occupants in the regular course of business.

The tax will be paid to the Massachusetts Department of Revenue via Mass Tax Connect. No matter how many days you rent out your property each year, if you operate a short-term rental, a hotel, lodging house, bed and breakfast establishment or a motel, you must register with DOR using Mass Tax Connect beginning July 1, 2019. If you rent for fewer than 14 days there will be way to notify Mass Tax Connect of this and you will not be subject to the tax.

The Massachusetts state room occupancy excise tax is 5.7%. Each city and town also have an option to tax up to 6.5% which will vary. There is a 2.75% Convention Center Finance Fee for rentals in Boston, Cambridge, Worcester, Springfield, West Springfield and Chicopee. Towns which are members of the Cape Cod and Islands Water Protection fund have a 2.75% tax. Cities and towns may also have a 3% Community Impact Fee.

Please see this chart of local option taxes and fees by city and town.

Here are Massachusetts Department of Revenue FAQs.

As of this writing, Airbnb is not collecting this tax on behalf of hosts, who must add it themselves to their fee and remit it appropriately.

If your short-term rental is rented more than 14 days a year please let us know and we can help you determine how much room occupancy excise tax you should be collecting and the best way for you to manage this important part of your rental process.

John Schachter + Associates can also help you register your short term rental with Mass Tax Connect.  Talk to us today.