<p>With an end-of-the-year stroke of the pen, Gov. Charlie Baker signed legislation last Friday extending state and local occupancy taxes now paid by hotels to short-term rentals such as those offered through Airbnb.</p>
With an end-of-the-year stroke of the pen, Gov. Charlie Baker signed legislation last Friday extending state and local occupancy taxes now paid by hotels to short-term rentals such as those offered through Airbnb.
The widely debated bill has been making its way through the legislature since early last year, and came about partly out of concern about the effects of Airbnb and other online rental platforms on the hotel industry in Boston. But the bill could have far-reaching implications for the Vineyard, where the lucrative summer rental market has grown into a big business that has been largely unregulated and little studied.
The new law goes into effect July 1 and will tack a 5.7 per cent hotel/room tax onto most short-term rentals. There is an exemption for people who rent their properties for 14 days or less per year. All others, including homeowners who rent their homes through summer rental agencies or websites such as Weneedavaction.com, Vacation Rental by Owner (VRBO), and Airbnb, will pay the tax, plus more in towns that adopt local option taxes.
The 5.7 per cent tax goes to the state and is expected to generate millions; local option taxes are returned to the towns.
A specific provision in the bill for the Cape and Islands creates a 2.75 per cent add-on tax, with proceeds going to a Cape Cod and Islands Water Protection Fund. The tax will be automatically applied in Barnstable county but is optional for towns on the Vineyard, according to information provided by the Cape and Islands state Sen. Julian Cyr.
In addition, towns can levy an additional local occupancy tax of up to 6 per cent on all short-term rentals and an optional community impact fee of up to 3 per cent more on people who rent two or more professionally managed short-term rentals in the same town. Rental properties, regardless of whether they are rented for 14 days or fewer, also will be required to register with the state by September and carry $1 million in liability insurance.
Properties that are rented for more than 31 consecutive days to the same renter and month-to-month leases are not subject to the law. People who run owner-occupied bed and breakfasts with fewer than four rented rooms are also not affected
The new law has already caused reverberations on the Island, with rental agencies reporting a flood of calls from concerned homeowners.
“There are still so many unknowns,” said Anne Mayhew, owner of Sandpiper Rentals based in Edgartown. “We can’t give them a clear picture yet of what that tax number is going to be.”
The new law applies to any short-term rental agreement signed after Jan. 1 for rentals beginning July 1; leases signed last year for the coming summer are exempt.
Rental agents said the absence of a grace period between the signing of the bill and the signing of new leases in the first few weeks of January, typically the busiest time of the year for summer rentals, came as an added blow.
“For the governor to sign it four days before it went into effect . . . it left us with no time to deal with it,” said Joan Talmadge, co-owner of weneedavacation.com, an online rental site that hosts about 4,000 properties for the Cape Cod region, including about 450 on the Vineyard. “We were hoping that maybe they would phase it in. To go from zero to possibly 15 per cent is a drastic leap,” she said.
Mrs. Talmadge said she has heard from residents who are now considering selling their homes because they may no longer be able to break even on their property.
“I think there’s going to be disruption,” she said, speaking about the summer rental market.
Mrs. Mayhew, whose company handles roughly 700 rental homes, had another view.
“I think anyone who comes to the Vineyard plans on continuing to come to the Vineyard,” she said.
Elected officials are also wrestling with the implications of the new law, including the various local option taxes and enforcement of the new rules. Edgartown town administrator James Hagerty said town leaders are planning to meet with the Martha’s Vineyard Commission in the coming weeks to discuss the next steps.
“We don’t know how much revenue we could get from it,” Mr. Hagerty said. “Since it was so recently passed . . . we need to figure out the various interpretations and what we need to do.”
Chilmark sent out an email Monday advising that the law “will pose significant challenges for owners conducting short-term rentals in 2019.”
Town administrator Timothy Carroll said selectmen plan to discuss the new law at their next meeting. Various town boards are busy counting up how many rentals fall under the law’s definition of short term, he also said.
“The number of homes that are rented is one thing, the number that is rented out between 14 and 31 days is another,” Mr. Carroll said.
Martha’s Vineyard Commission executive director Adam Turner, who closely followed the new law as it made its way through the state legislature, said it could be an economic boost for the Island, but more analysis is needed.
“It’s a complex bill,” Mr. Turner said. “What the commission is going to do is analyze this more closely for the towns and develop information on what the impact is going to be.”
He said Island towns that are part of the water protection fund could become eligible to receive funding to improve wastewater treatment and protect saltwater estuaries, provided they develop wastewater management plans that are approved by the Massachusetts Department of Environmental Protection (DEP).
“It gives us the ability to get projects done here,” Mr. Turner said of the water protection fund.
Barring legal challenges, the new rules will be in place by this summer. Meanwhile, towns and rental agents are scrambling to sort out the details and evaluate the impacts.
“There’s really mass confusion and we’re doing our best to find the answers,” said Mrs. Talmadge.
Key Features of the New Rental Law
• Takes effect July 1, 2019 on units leased after Jan. 1, 2019.
• Extends the state room occupancy tax of 5.7 per cent to short-term rentals; allows towns to levy a local tax of up to 6 per cent more.
• Requires property owners to carry liability insurance of at least $1 million for each short-term rental.
• Exempts properties rented for less than 14 days per year from taxation, but they still must still be registered and insured.
• Creates a Cape Cod & Islands Water Protection Fund with an optional additional 2.75 per cent excise tax on short-term rentals.
• Lets towns decide whether to impose additional taxes, require inspections and impose other regulations and means of enforcement.
Corrected from an earlier version which reported that the 2.75 per cent add-on tax for a water protection fund would be automatically applied in some Vineyard towns. The tax will be optional on the Vineyard but will be automatically applied on the Cape.
Comments
If they wanted to even the
Michael H DarianIf they wanted to even the playing field why not drop the tax from hotels and motels? All this will do is drive people away from the Vineyard depriving local businesses of tourist dollars. My family rents several homes for two weeks so we can all be together on the Vineyard and now we will look elsewhere. Hello Outerbanks and good riddance to taxachussetts!
The Outer Banks has the same
Alex M Oak BluffsThe Outer Banks has the same supplemental vacation rental taxes you'll pay to enjoy being there too!
Wow Michael H. that’s a
Wow EdgartownWow Michael H. that’s a little harsh. I’m sure that other states, if they haven’t already, will follow Ma. and do the same thing.
So...Martha's Vineyard will
WashAbhorred EdgartownSo...Martha's Vineyard will now be sending 8.5% of rental income to the State and Cape. That's money that may have been spent at Island businesses.
The plus side is that maybe
William Edg.The plus side is that maybe no one will come to the Vineyard next summer. No traffic would be nice. Will we see "No Help Wanted" signs that we have seen in the past?
Towns can add up to 9% in additional tax and then add another regional tax of 2.75%.
If you add all of that up I get 17.45% tax. If you have a $6,000 weekly rental and a town imposes all of the taxes it will cost $7,047 to the renter. If the economy is good probably, not much of a problem. But, when the economy goes down as it will at some point in time, big problem.
Some will say we don't care (usually people that have enough money). Others in the trades, retailers, restaurants, etc. will feel the pain. Look out!
Thanks to Charlie Baker for
Thomas Hodgson wtThanks to Charlie Baker for doing something sensible with the 14-day exemption he insisted on. Not only does the exemption spare truly "short term" people a lot of expense and bureaucracy, that exemption makes MA tax law agree with the Federal income tax code, which also has the 14-day rental income exemption. That exemption has an interesting history. It's called the "Masters Exemption". In Augusta, Georgia, during the two weeks of the Masters golf tournament, rent prices are really, really high --- one to two thousand dollars per bedroom per night. A bunch of tax-hating, wealthy and connected homeowners in the Augusta, Georgia area managed to wangle that perk into the tax code.
Thank you for that little bit
Carol formerly ChilmarkThank you for that little bit of tax history! and yes, 14 days seems sensible.
It should drive rental prices
Bob EdgartownIt should drive rental prices down as it seems every home owner thinks there home is worth $12,000 a week and when people find out about the $2,000+ tax something has to give. Or the island will in fact slow down which plenty people seem to want, be careful what you wish for. Also this is just a money grab for the state as they never have enough.
Perhaps it is time we also
WashAbhorred EdgartownPerhaps it is time we also evened the playing field and charged the same electrical rates to homes that we charge to businesses (businesses get a discount). Also, let's start charging sewage rates by the gallon rather than the drain (great favors businesses).
Level playing field...right?
Massachusetts is the most
Noreen Wood ChathamMassachusetts is the most unfriendly state to tourism. Rental car taxes are off the charts now rental home taxes. Stupid, just stupid. There had to be a better way to protect the hotels than to drive tourist out of the state. When will liberal tax and spend states wake up.
Well, if Mass is so
Carol formerly ChilmarkWell, if Mass is so unfriendly to tourism, why are the Cape and Islands so packed with tourists from spring to fall?
They don’t know any better
Scott EdgartownThey don’t know any better
Will there ever be enough tax
Tisbury voter Vineyard haven massWill there ever be enough tax,fee,revenue coming into this State.We have casino revenue coming in and most recently marijuana tax.Some years ago state told us Scratch cards and numbers would more than take care of tax revenue coming to local towns for years.Fees on electric bills and boarding our boats for transportation,never ever be enough,one thing left is tax prostitution sure state can justify that somehow.
Here is the issue. Everyone
Chris OBHere is the issue. Everyone hates renters, right? But what will happen to the local economy? Cleaning persons that lose business, landscapers, caretakers, restaurateurs all will lose some business. To treat a homeowner who rents for 2 months a year (July/August) negatively different from a person who rents 12 months a year is lunacy. To say that these persons act like a hotel or a B&B is lunacy. Bed and breakfasts rent nightly, not weekly. Hotels rent nightly, not weekly. These have lots of turnover, they can afford to have high taxes because they can make constant money all year long. They can host weddings and parties, etc. Short term renters don’t do that. This will force owners to cut costs since rents will have to be lowered to help renters pay the tax, that means less work for the outrageously overpriced workers on island. You reap what you sow.
“What does this new law
Linda Edgartown“What does this new law require?
The new law expands the state’s hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). Massachusetts is one of the last states to adopt this type of tax. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, personal, or business use. At the insistence of MAR, the new law only applies to short-term rentals, meaning ordinary tenancies, such as an annual lease or a tenancy-at-will, are not covered by this bill.”
https://www.cciaor.com/shorttermrentals/
Chris, you opened your
Susan PennsylvaniaChris, you opened your comments with "Everyone hates renters, right? " That's awfully harsh and I hope not true.
Many renters love MV, are respectful of the island, and consider spending time on MV to be a blessing. Please reconsider your hatred.
(BTW, I don't think owners will lower their rental fees to cover the tax.)
Sorry, but I was trying to be
Chris OBSorry, but I was trying to be sarcastic. So many times I read comments about the “overcrowded” island. I fully understand and absolutely appreciate the tourists. There are lots of places to go and some would argue better places, but they come here and we all make a boat load of money from it. I simply mean to say that a tax this high (15%) is crazy. I can understand a tax halfway between nothing and what the hotels pay, but not this. Hotels can weather storms, they have nightly occupancy and thus can make up ground, rental homes can’t do that. They are allowing towns to inspect and regulate homes that rent for 6-8 weeks and force them to be compliant with hotel standards. That is lunacy. Why would a homeowner want to keep doing that to themselves. Plus a 1 million dollar rider is now required. Ok, but your treating a 2-month business like a year round business. (PS most rent home for 4-6 weeks total on average). That is fine, but then I would suggest howneowners become LLCs and get the full tax benefit (everything becomes business expense). Then we will have LLCs owning most of the houses on island. The hotels won make no mistake about it, they bought and paid for this bill. I just think 15% (state, town and water tax) is a absolutely crazy.
You're right Susan, not
Isaiah ManhatitlanYou're right Susan, not everyone hates renters. I've been quite happy to be able to share our property with some really high quality people who have rented over the years. Glad you've had a good experience on the Island.
This is a very good thing. I
Neighbor OB corridorThis is a very good thing. I sure hope town meetings vote the full tax on these operators! Quality of life has gone downhill fast in my neighborhood as all these investors from Brooklyn have bought up houses and rented them three to a bedroom for what amounts to frat parties! So hard to sleep during our busy season, and "frat bros" peeing on trees in our yard. Yuk! Nobody year round can get a rental now as these landlords, some of them town leaders who boast about it, rent houses by the day. About time they paid for all the cops and fire and ambulances the "guests" require. Thanks gov baker. Why I vote republican. Common sense.
The small guy takes it in the
Jim CotuitThe small guy takes it in the shorts once again to support Taxachusetts rampant social spending.
Taxpayer as ATM- and the bloke renting out seasonally to pay college costs or defray the cost of acquiring the second home is fair game- along with the landscapers, cleaners and restaurateurs.
Too Tall Devall strikes again... thanks Charlie
We’ve had a camp since 1971.
Ellen Sturgis West Tisbury and StowWe’ve had a camp since 1971. We started renting it to cover the taxes. We don’t make money on this. Until I read this article, I was presuming there was an exemption for seasonal rentals. Once again , laws are passed to benefit cities (loss of rental properties to AirBnB etc).
Will those private homes also
Innkeeper Vineyard HavenWill those private homes also be subjected to three inspections (health, fire and building) annually by the town of Tisbury to protect the health and safety of occupants as Bed & Breakfasts are presently?
It seems like the fallout of
Islander TooIt seems like the fallout of this tax is unclear.
It seems that in many communities, Airbnb, by making it so easy to run a home as an income producer, has had major effects on the local rental markets---owners have removed residences from the year-round rental market in favor of short-term rentals. The easy money from short-term rentals also seems to have contributed to overheating the general real estate market, as homes are priced with the calculation of short-term income generation in mind. Thus, it is just possible that this law might cool down housing prices on the Island. And liberate more residences for year-round rental. I think that would be a long-term benefit and might result in an uptick in the number of responsible landlords who rent to year-round tenants. That would in turn help towns meet affordable housing criteria and lower the incentives for *new development* by affordable housing entities.
I doubt it. Many of these
Chris OBI doubt it. Many of these rentals are by families that use the place for themselves and rent out the remaining weeks. Thus, they would not rent year round anyway otherwise there would be no point in having a second home. Has anyone thought about the impact of the summer workers? They now have the pay 15% tax to rent a home. How many of those will still come and if they do how many will pool together and live in a home well beyond the amount agreed to on a lease. It’s a poorly conceived law. Anyone who thinks for a minute the taxes will be used to help the island are way off base. The taxes will only be used for something else and then we will find new taxes to suck money from taxpayers. I have no issue with a tax but these are not year round rentals, they are seasonal and thus there should be some accounting for that. The homes are mostly vacant for 10 months and those families pay full rate property taxes, which pay for schools and fire/police year round. Is that fair? All of this when Trump has already limited your SALT deductions? Is owning a second home on island worth it anymore? I am not saying it will be the end of all tourism but I think you will see a difference. It will also affect all the people who rely on the second homeowners for work, landscapers, caretakers, etc. because people will need to cut costs because I really believe rents will have to be lowered by at least 10% to help renters meet the 15% tax. Lower rents mean cutbacks elsewhere. It also means you become less selective of who your rent to, which bodes bad for everyone.
Welcome to Taxachuesetts
Concerned Citizen Hyanis, MAWelcome to Taxachuesetts fiscally liberal to support your many social agendas
We travel to MV every summer
Frank Quinn Stevenson Ranch, CaWe travel to MV every summer from CA for two weeks. The last 10 years.
I’d be willing to pay the Tax if I knew the $ went to MV.
The rent on a townhome in Edgartown is $7,000 a week already.
Although a lot of other summer home rental areas charge this tax, there are a lot that dont.
We’ll miss MV
If a MV home-owner rents his
Fred OBIf a MV home-owner rents his/her house for (say) 9 weeks (63 days) during the course of a summer, does this new tax apply to (A) the full 63 days rented, or (B) only to the excess over 14 days, which would be 49 days? Either way, might it still be possible to successfully lobby the State legislature to recognize the complete error of its ways and therefore increase the exemption to 63 days, provided that none of the days are rented through Airbnb? Increasing the exemption in this manner would shift the burden from those who can afford it the least to those who can easily bear it. Otherwise, we are all talk and no action.
It will be applied to all 63
Juleann West TisburyIt will be applied to all 63 days. And, I think the overall goal is not just to reign in Airbnb but to create a registry.
Anyone know how this will be
AIK West TisburyAnyone know how this will be enforced?
My understanding is that the
Dan ObMy understanding is that the taxes owed will be due upon filing your tax return. You have to report income from rental properties, and they will then tax "x" percentage from that income, depending on your location, and days rented.
Also- I think a main advantage of this bill is being lost here. The additional local tax added will divert money into a wastewater management fund. This is finally a mechanism to raise money for wastewater infrastructure on the island, which is much needed.
The local taxes collected will go to pay for sewage treatment and expansion which help keep the waterways clean and the tourists returning.
We already pay state and
Up Island up islandWe already pay state and federal taxes on any income we make on vacation rentals, so now we will be paying an additional sales tax? Good way to destroy an industry.
The tax will be paid by the
Chris OBThe tax will be paid by the renter and collected by the landlord and paid to the state. In effect, as a landlord, you are now a tax collector. Yes you still pay income tax and 15% to the realtor company.
This law requires a million
Thomas Hodgson WTThis law requires a million-dollar insurance liability policy for those who rent out their houses? How much does that million dollar policy cost? $500 a year? $1,000? More? Whatever the amount is, the requirement shows that the insurance companies have some wicked heavy paw prints on this law. The insurance requirement, if enforced, means millions and millions of dollars more in profit for them.
MVG...how about digging up a cost estimate on these policies? That would be useful information to add to this article.
FYI a Federal Judge blocked
Gina Menemsha/nycFYI a Federal Judge blocked a NYC law requiring AirB&B to hand over data each month about people who use its apartment listings service yesterday.. This ruling was handed down by a US District Judge Paul Engelmayer in Manhattan.. No final ruling until both sides review evidence..
W/out the AirB&B input the Mass law would miss a large segment of the Island rental base.. I don't understand how this law can be realistically enforced via the Rental agent & a home owner Honer system.. .. if that same ruling happened in MASS..
One key provision of this new
Thomas Hodgson WTOne key provision of this new law is that it is only for "31-days-or-less" rentals.
Once, in the "mist"s of Island history, most rentals were for "the season"...from June 15 to Labor Day. As life on the Mainland got busier, monthly rentals came in. Then we got the weekly rentals. Air BnB now pares the rental time segments to days.
Considering the paperwork and larger expense now to be involved in these short rental periods, it might be logical for those in the practice of renting weekly to stop the practice, and switch to monthly or to seasonal rentals. Then there would be no million-dollar insurance policies to add to overhead, no nosy inspectors to tolerate, no additional pages on the annual taxes, no piles of money to send elsewhere, and so on.
It's likely that more than a few real estate people and real estate lawyers are already teasing apart this law, and working out the legal and contractual finesses that will enable people to avoid this tax.
Cash only Summer rental
B EdgartownCash only Summer rental available now. Who is going in force the law? Do rental properties have to register with the state now.
I HAVE QUESTIONS.
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