MA short-term rental law imposes requirements for taxes and liability insurance
If you have Massachusetts clients who engage in short term rentals of their property, be aware that there are new regulations that will affect them. A new law aimed at rental property arrangements, such as Airbnb, will impose a 5.7% hotel room tax to short term rentals and require short-term rentals to be registered with the state. The law also allows for cities and towns to add local taxes above and beyond that. In addition, people who rent out their property must also obtain $1 million in liability insurance.
Regulations go into effect for rentals beginning on July 1, 2019 that were made after January 1, 2019. The law exempts those who rent out their property for for 14 days or less per calendar year.
RealEstate Boston offers more details about who the law affects in its coverage: Renting an Airbnb in Massachusetts? Here’s what you should know about the state’s new short-term rental law:
The law defines short-term rentals as "occupied property" where at least one "room or unit is rented out by an operator through the use of advance reservations." That includes apartments, houses, cottages, and condominiums.
The definition does not include hotels, motels, and other lodging establishments providing accommodations to guests, as well as time-shares and month-to-month leases.
"A short-term rental is a rental that is not for more than 31 consecutive calendar days," says the Department of Revenue.
The article also says that:
"The tax also does not apply to rentals that go for less than $15 a night, nor does it apply to military members who rent out their homes or rooms while they’re deployed on official orders."
Massachusetts is the first state to require registration, but in other respects, is not an outlier in this legislation. The National Council of State Legislatures (NCSL) reports that legislative action on short-term rentals is continually taking place across the states and it does not appear it will subside any time soon. In terms of taxes, they report that:
According to the Bloomberg Tax 2018 Survey of State Tax Departments, 25 states place the obligation on the owners of short-term rental accommodations to collect sales tax, while 14 states place it on the third-party facilitator. More than 20 states include any fees paid to the facilitator in the taxable price of the rentals.
A collection method spearheaded by Airbnb, in which the company has entered into voluntary contract agreements with departments of revenue to collect and remit taxes on hosts’ behalves, has become increasingly popular.