Two weeks after the short-term rental tax was signed into law by Gov. Charlie Baker, elected officials and town hall administrators on the Vineyard were busy sorting through the details and fielding phone calls from confused homeowners.
Two weeks after the short-term rental tax was signed into law by Gov. Charlie Baker, elected officials and town hall administrators on the Vineyard were busy sorting through the details and fielding phone calls from confused homeowners.
The law, which extends the hotel rooms tax by adding 5.7 per cent to short-term rentals, is already causing ripples on the Island where the lucrative summer rental business is just gearing up for the season.
“As I’m sure is the case for you, my phone has been ringing off the hook,” Martha’s Vineyard Commission executive director Adam Turner told the Edgartown selectmen at their meeting Monday. “People just don’t know what is going on.”
The new law takes effect July 1. It will impose a 5.7 per cent state tax on rentals of 31 days or less. It also contains a provision that allows towns to charge an additional local occupancy tax of up to 6 per cent.
The state Department of Revenue (DOR) has posted a list of frequently-asked-questions (FAQ) on its website about the new law.
Speaking to the Edgartown selectmen Monday, Mr. Turner explained that the 5.7 per cent tax will go to the state while the local occupancy tax will come back to the towns. If Edgartown voters choose not to adopt an additional local occupancy tax at their town meeting this year, he said the tax will automatically be set at four per cent to match the four per cent optional rooms tax previously adopted by the town that currently applies only to hotels, inns and motels.
Selectman Arthur Smadbeck expressed surprise.
“I assumed you had a choice in enacting this, meaning that you would go to town meeting and say we’re going to tax at four per cent,” Mr. Smadbeck said.
“No,” Mr. Turner replied. “Because you are [already] collecting four per cent for your hotels you have to tax at four per cent,” he said. “If you do nothing it would go to four per cent. If you want to do anything else, you have to bring it up at town meeting.”
Mr. Smadbeck expressed confusion about the exemption in the law for landlords who rent for 14 days or less. He wondered whether people who rent out properties for two-week periods throughout the summer would be exempt.
A spokesman for the state DOR clarified later that the exemption only applies to properties that are rented out for two weeks or less. Once a rental exceeds the two-week period, the tax goes into effect for the entire rental period, including the first 14 days, the spokesman said.
Mr. Smadbeck questioned whether the law will result in extra work for the town in terms of tax collection, but Mr. Turner said the state will be responsible for collecting the local occupancy tax and returning the money to the town. In a rough estimate using data from the recent housing production plan, he said a 4 per cent tax could bring in more than $2 million for Edgartown alone.
“This is a pretty big issue for the town in terms of the revenue coming in,” selectman Michael Donaroma said.
In West Tisbury, town administrator Jennifer Rand said the phone calls have quieted down since a link to the DOR website was posted on the town website.
But before that, “it was fairly relentless,” Ms. Rand said. “The first couple days [after the law was signed] we had many, many phone calls from homeowners and realtors.”
West Tisbury is the only Island town that has not adopted the optional rooms tax on hotels and inns. So unless the town votes to change that, town rental properties will only be subject to the 5.7 per cent state tax, Ms. Rand said. “People really want to know what we’re going to do because they’re trying to solidify their rentals now,” she added.
Selectmen plan to discuss the new law at their meeting on Jan. 16, Ms. Rand said.
In Chilmark, selectmen briefly discussed the new law Tuesday night.
“There is state tax legislation that is rather confusing if you have read it all,” selectman James Malkin said. “There are a number of questions I have . . . particularly how it applies to this town, who’s going to collect, who’s going to pay, who’s going to declare, and if we as a town need to take action at an annual town meeting. My view on this is that at this point we should wait . . . but I need more information on how exactly this is going to work.”
Like Edgartown, Chilmark has previously adopted a four per cent rooms tax.
Joan Malkin, who represents the town on the Martha’s Vineyard Commission, spoke briefly about another provision in the law that allows some towns to tack on another 2.75 per cent to create a Cape and Islands Water Protection Fund. Mrs. Malkin said only Edgartown, Oak Bluffs and Vineyard Haven among the six Island towns will have the option of adding this tax and only if they present a comprehensive wastewater treatment plan.
“The three down-Island towns can elect to impose an additional 2.75 per cent; this town cannot,” she said.
The bill also includes an optional, additional three per cent community impact tax that could be imposed on people who rent two or more professionally managed short-term rentals in the same town.
With so many questions remaining, Mr. Turner told the Edgartown selectmen:
“I don’t understand all the impacts either. Give me a month or six weeks and I’ll come back with more information.”
Noah Asimow, Landry Harlan and Holly Pretsky contributed reporting.
Comments
Regulation of short-term
KaitlynRegulation of short-term rentals is key. However, what many people don't realize is that traditional homeowners insurance doesn’t cover vacation rental business activities. Communities are recognizing this and regulation requiring at least $500,000 of liability can prevent allot of potential problems. Policies like the one Proper Insurance sells (https://www.proper.insure/) make short term renting lucrative and safe for homeowners and the community.
I believe that the
Frank OBI believe that the requirement is $1 million liability.
While the Island Housing
gina menemsha/nycWhile the Island Housing Bank is a noble cause , I feel they're really being overly aggressive on requesting a 3% take of a potential 4%+ rental tax for their Agency funding..
While there is a warrant time frame, perhaps a more sensible strategy would be to let each town comprehend all the rules involved then implement accordingly. I expect a learning curve on this new tax on both sides.
I am a little disappointed in
Edgartown Resident EdgI am a little disappointed in my Select Board and their staff. Most of the information Mr. Turner provided has been available for many days from the popular internet search engines. The text of the bill was available immediately from the state. And the department of revenue has provided an online frequently asked questions in the past day or two. The Cape and Island Realtors had a publicly available guide to their agents online, top of the search list, for days. A little legwork is expected on something this big. One point of clarification, the article and perhaps Mr. Turner make it sound as if you get 14 days free and pay after. Not the case. If you cross the 14 day threshold you collect on every day including those 14. As for the housing bank...I'd prefer regional groups not earmark our money just yet. Edgartown had the highest tax levy increase in the state last year, and this year it is no small jump. Definitely not in the spirit of Prop 2.5. We are fortunate in that we have a lot wealthy seasonal homeowners contributing taxes without using a lot of resources. But lately, we've been playing a bit fast and loose with that money. What if we bank the new income and reduce taxes for them and us year round folk?
The commenter is correct, and
EditorThe commenter is correct, and the story has been clarified.
Seconding here the above
Long-time in Edgartown EdgSeconding here the above suggestion that Edgartown take a look at banking the new tax revenue and reduce existing taxes--in the spirit of Prop 2.5
The current high tax levels in Edgartown have, in essence, been imposing a kind of rent tax on properties before the new bill existed and an adjustment is in order now.
Affordable housing is a
William EdgAffordable housing is a prison sentence for life of those who sign on. I know this statement is seemingly outrageous, but, just think about it for a minute. Think about the restrictions, think about when you are ready to retire and you can not sell your house for (much of a profit to keep with inflation)a profit to pay for your retirement, think about how you will pay for taxes, food, etc. if you don't work for the town or schools with defined benefit plans? How long will those defined benefit plans last when they are gone for the most part in the private sector now? Government pensions are sadly underfunded now. Will the young teachers, Police, town workers get the defined benefits plans 40 or 50 years from now? I would doubt it.
So, what to do?
Thinking outside of the box, I would not restrict property values. I would join them. What if the housing trust were to split the cost of a $500,000 house? $250,000 each. The owner would be responsible for the upkeep and the mortgage and taxes. The bank would provide funding for qualified people and 20 years later if the owner wanted to sell at market value and it was double the price, then just simply split the value and the trust would have another $500,000 to invest. Simple. Unless something goes wrong. Then not so simple. It has to be made so that the investment by (whomever) is not lost.
The way affordable housing is being dealt with now will only bring disastrous results in the future. No one is thinking ahead to realize this.
If the town gets 2m a year
here we go again edgIf the town gets 2m a year from the state, then perhaps that will reverse the big tax increase I just got. I wash SHOCKED when I opened my recent property tax bill from Edgartown. The property tax assessment went up 18%, yet the quarterly payment went up 37%. What is that all about? My understanding was that when property values went up, the tax rate was to go DOWN, so that the budget is equally spread around among the properties. While its expected some values to decline, while others go up, I have not noticed ANY property values in Edgartown decline. I have no disagreement with the assessed value, but the tax bill was a SHOCK. One would expect the tax increase to equal the increase in assessed value..NOT double it..Its HUGE percentage increase. What happened to proposition 2.5??
I want to point out a
Edgartown Resident EdgI want to point out a technicality regarding tax billing that may help buffer the tax blow a bit. We pay our first two quarters as preliminary taxes that are only a 2.5 percent increase over last year. When we experience a big increase in taxes, which we only see in the third and fourth quarter "actual" bills, we have to make up for our low payments in the preliminary quarters so all four quarters add up to the total tax due. Confusing! However, if you take a minute to look at your bill and the total taxes assessed, and compare that to last year's total tax you will see a more modest increase. If you assume the third and fourth quarter are half your new taxes, you may fall off your stool in shock. I do agree completely with your basic argument. And always remember, your assessment just determines your share of taxes, the budget drives the increases. If everyone's assessment were cut in half this year we would just have twice the tax rate and the same tax bill.
The town has to many
Bob EdgartownThe town has to many employees is part of the answer. For every 1 person working for the town there is sometimes 3 people collecting a town paid pension and health insurance for that job. It only gets worse as the town continues to add new employees to the list as they always want more bodies. Another issue is every department wants to have the latest cool looking toy to make their job easier. We can never say no to school, police or fire so the cycle repeats.
That's a ship load of money!
BF WTis.That's a ship load of money!
Why do law abiding, U.S.,
Anne EdgartownWhy do law abiding, U.S., budget conscious, citizens have to constantly be penalized for politicians who are incompetent budget minders of our hard earned money. You can’t get blood from a stone anymore. Let’s start our own #nomoretaxes or #nomorepolitians movements.
Yes,this speaks more to gross
Mark EdgartownYes,this speaks more to gross mismanagement at both the local and state level. Tax and spend is not the way to improve quality of life, simple economics...
Mark makes a very good point.
DaveMark makes a very good point. Tax and spend, spend and tax, it is government run amok.
We are tremendously fortunate here in the US and more specifically here in Edgartown where we have an open town meeting; were no resident has more power than another, where no government official is allowed to spend a penny without approval from the majority of voters. We simply show up at town meeting and explain exactly what services we wish the town to discontinue and reap the benefits of ending the ceaseless waste. Schools, public safety and public works amount to probably 90% of the spending so presumably 90% of the "waste".....lets get to work.
It seems like there's never
Jim CambridgeIt seems like there's never enough money for the government. Now, the Land Bank sees an opportunity in this to make a money grab on top of the state and local taxes. My friends and I have vacationed for many years on the Vineyard, always through the weneedavacation.com website and have rented some lovely homes. I have yet to have a negative interaction with any homeowner and we've always enjoyed ourselves and left the home in the condition we found it. We'll wait to see what the final impact is, but if it's a 15% increase, a $4000 rental becomes $4600. For the renter, that additional $600 offers no benefits. We will either not go to the Vineyard or go less frequently. If we do go, we'll eat more meals in and not frequent the restaurants like we usually do. Our average restaurant tab with dinner and drinks is about $200 and then it's $240 with the tip. There'll be a negative impact on local businesses and the servers and staff who work there.
We're taking a wait and see attitude, but if it's going to be a 15% hit, we've decided to forego the Vineyard this year and next and will travel to Ireland instead. Maybe in the current economy there won't be a negative impact, but the economy always has its ups and downs but that tax rate will always be there.
Another example of the
Mark EdgartownAnother example of the government overreaching, what you do in your own home with your own property is none of the state’s business. Separately, the money grab from housing bank is also absurd, broadly collected taxes should fund public works for the benefit of ALL residents.
RE "Separately, the money
Genuine B&B fan TisburyRE "Separately, the money grab from housing bank is also absurd, broadly collected taxes should fund public works for the benefit of ALL residents."
I am glad to hear someone making this point, which needs to be made more often: The Land Bank tax benefits everyone equally. Anyone can go to a Land Bank property.
Whereas, an affordable housing tax amounts to a subsidy of a small numbers of individuals in the community and also individuals from other, off-Island, communities---individuals chosen by private actors who have good jobs running the private, nonprofit entity---by taxing the rest of the community. Many of those paying this subsidy actually have no extra means to subsidize others--all they have is their main asset, their house. And their labor. Meanwhile, having affordable housing properties in a town REDUCE the size of the tax pot for the whole town because minimal taxes paid. The current business model of the Housing Trust is simply not fair, and it is not fiscally sustainable.
It used to be the law that anyone could legally rent out up to four bedrooms on a bed-and-breakfast basis in their own home. It is really a shame that Airbnb has, basically, ruined this very reasonable and modest way for home owners to make some income from their own homes. It is also a shame that so many bona fide hotels and what would be called Pensione in France and Italy started calling themselves bed-and-breakfasts, thus muddying the waters as to what a genuine B&B is: namely, a room in someone's home, where the mom or pop makes up your bed with clean sheets and cooks you breakfast in the morning.
How is the town or state
Paul ObHow is the town or state going to know if I rent out my house and for how much
Do you have a broker? Do you
William EdgDo you have a broker? Do you advertise in any way? You live in a small community. One or all will eventually lead the authorities to you. Maybe a jealous neighbor...
Maybe the thing to do is 32 day rentals?
They will pay a service that
WashAbhorred EdgartownThey will pay a service that runs scans, searches, etc. for rental ads. They can then pay that service or another service to send out notices and collect the taxes. If you still don't pay they can then refer the debt to another private service for collection. The services aren't inexpensive...so they have to raise the tax rate.
The enacted law provides for
Response to PaulThe enacted law provides for the maintenance of a registry and requires registration, provides penalties for failure to register...
Edgartown has always had a
Sara Piazza EdgartownEdgartown has always had a tax for rentals, on a schedule. You were always allowed to rent to up to four unrelated people with no tax liability; upwards of four, you pay a rooms tax. This bill penalizes those of us renting a room to make ends meet and to allow us to stay in our own homes. I rent a room in my home during the summer months (as my grandmother did in the 40s and my mother did in the 50s, 60s, 70s, and 80s. My guests for the most part do not bring a car, but do bring $ to the the town. I enjoy meeting my guests, and they enjoy my home. Renting a room in my home hurts nobody, benefits many, and makes a big difference in my being able to pay my taxes and expenses. And contrary to popular belief, this is not money "hand over fist and unreported," - it is hard earned! With every penny claimed - so why punish us?
I am already getting taxed on
b hinkson EdgartownI am already getting taxed on my property at a rate that is always increasing so now they want rental tax on the money I am trying to save to pay the property tax that I can't afford to pay unless I rent my property .. go figure .
Some days it almost settings
Sara Piazza EdgartownSome days it almost settings they are deliberately trying to get rid of us.
I see the need for affordable
Elyssa West TisburyI see the need for affordable housing; however I also see the need that many people rent rooms in order to maintain their homes and pay real estate taxes. A better solution would be to not tax people whose rental is also their primary residence. This would solve the problem, while giving consideration to the needs of the community as many of these individuals are senior citizens.
I agree 100% it is the people
Bob EdgartownI agree 100% it is the people who are running a business with the property and live in NY etc.. that bothers me. Most of them do not care about the island like we do they care about their bank account.
In most high rental vacation
paul adler up islandIn most high rental vacation areas short term rentals also require inspections by a building official and a fire smoke/carbon test, wired units only, to make sure short term rentals are safe for children and other occupants. Pools must be fenced, etc. Usually rentals over 2 weeks or longer do not require these safety inspections.
In an effort to be helpful...
Benjamin W TisburyIn an effort to be helpful...
The enacted law is Chapter 237 of the Acts of 2018. Google will help. The enactment changes parts of Chapters 23A, 29C, 62C, 64G, and 175 of the General Laws. Section 1 of SECTION 6 of the enactment, modifying 64G, provides two separate definitions for "Bed and breakfast establishment" and "Bed and breakfast home". Section 2 of that SECTION provides "this chapter shall not include... (vi) bed and breakfast homes;" Some of the people who could otherwise be affected quite negatively may be able to help themselves by making even better friends with their favorite very capable person having truly genuine legal talent and analytic ability, reading closely, thinking deeply, and rearranging their business suitably. Good luck to all in any event paying taxes and coping.
Ben: could you please send me
Jane EdgartownBen: could you please send me the link to this section. I looked but couldn't locate it. Are you saying that "homes" are exempt? Good Comment and I'd love to see the wording. Thanks
When the towns collect this
Elizabeth Rosen EdgartownWhen the towns collect this new revenue, what will they do with this windfall?
No new services will be required from this action, will our property taxes go down?
In short, yes. This would add
Bruce EdgartownIn short, yes. This would add to the town's annual local receipts that would reduce the amount needed to be raised by property taxes.
I like your wishful thinking.
Frank OBI like your wishful thinking. More likely the towns will just spend more.
Please correct me if I am
joanne chlmarkPlease correct me if I am wrong, but the renter, not the landlord, pays this tax. Therefore all rentals will be equally affected so charging the tax to your renter will not deter them because every home they want to rent has the same tax. Unless the don't want to vacation anywhere in Massachusetts, they will face the same tax burden.
However in this increasingly
Frank OBHowever in this increasingly uncertain economy, some renters at the lower end of the income range may elect to not vacation at all. The extra cost ($351 on a $3000 rental in OB where the total tax will be 11.7%) may cause some folks to staycation at home this year.
Any given renter will pay x
Ron DiGiacomo DelawareAny given renter will pay x for y house. If x now includes tax that you’ll not see, you’ll now get x less the tax rather than the entire x. Your rents just went down. Take an extreme example to make it more clear. Let’s say I’m willing and able to pay 2K to rent your house. If the tax is 100%, I’m not going to pay 4K. Rather, I’m willing and only able to pay 2K and if you want to rent it, you’ll only take in 2K less the tax, in this example 1K.
It’s no different than a mortgage. A buyer can afford x mortgage payment per month. A lower mortgage rate allows the buyer to purchase a more expensive home for the same x per month.
People should be calling the
Juleann West TisburyPeople should be calling the offices of Governor Charlie Baker 617-725-4005, Senator Julian Cyr 617-722-1570, and Representative Dylan Fernandes 617-722-2430, and request that implementation of this bill be postponed until after the summer season at a minimum. Once approved by voters, it took three years for the state to open a medical marijuana dispensary, but this major new tax bill gets the green light with little to no public input. This legislation was intended to address the impact short-term rentals (via platforms like Airbnb) is having on urban communities and to "even the playing field" (i.e., taxes) between these rentals and hotels and B & B's. These are problems that need to be addressed, but not by one-size-fits-all State legislation that simply burdens homeowners with regulations and then runs with the money.
Like I wasn't confused
Michael OBLike I wasn't confused already...
The elephant in the room that
Robert EdgartownThe elephant in the room that has not been mentioned is the registration requirement in the law. The property owner will need to register with the town. What exactly does that mean? I hope it means that the town will review the home owners property and perform appropriate inspections as done for hotels, inns, etc.. I would also hope that the renter would receive back a confirmation that they can rent and how many renters are allowed in the house for the rental period. The cost for this work can be paid for out of the tax revenue. In Edgartown this could be a part time job for someone. The town will get control of public safety issues such as: inadequate fire alarms, over used wastewater systems, to many vehicles in public streets, etc.. if less people chose to come to our beautiful island because of the taxes then do they really want to be part of pardise or just steal frim it?
As the law is currently
Juleann West TisburyAs the law is currently written, the homeowner registers with the state, not the town. Towns who choose to implement a local tax will set inspection requirements. Apparently the state is not interested in spending their share of the revenue to oversee public safety issues. Also, the homeowner is expected to cover the cost of inspection and a registration fee -- as I expect hotels and B & B's do. But yes, this is an opportunity to gain some control over substandard and unsafe housing. https://www.cciaor.com/shorttermrentals/
I just hope this does not put
Lorraine EdgartownI just hope this does not put an untenable burden on people who rent to keep their property in the family for generations. The top level and the bottom level will not suffer, again, the middle will suffer, so what else is new these days? Probably not a popular posting....
I personally think we should
Chuck Hodgkinson West TisburyI personally think we should seriously consider this potential new source of revenue for each island town -- outside of our personal property and individual CPA taxes. I do not think the occupancy tax revenue should be used for a housing bank. We use our Community Preservation Act taxes for this purpose. In FY 2018 all six island towns raised $2,865,000 from our CPA tax surcharge revenue. The state added $855,000 in matching funds (average 31 percent matching rate). The total FY 2018 CPA revenue was $3,750,000 the majority of which is used for affordable housing programs -- many of which are built by the Island Housing Trust. I think each town should give serious consideration to passing and applying the occupancy tax revenue toward our annual high school tax assessments. Within the next three years there is a high probability a $100 million renovated high school and a $12 million renovation of the athletic fields will be proposed and added to each town's annual high school tax assessments. Based upon the projected FY 2020 high school assessment percentages and the projected annual cost of a $112,000,000, 25-year bond @ 3.5% interest; the following would be the bond cost for each town in year one. This cost would be added to each town's annual high school tax assessment: Oak Bluffs +$2.269 million; Edgartown +$2.218 million; Tisbury +$2.307 million; West Tisbury +$1.071 million; Chilmark +$382 thousand and Aquinnah +$153 thousand.
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