Massachusetts to start taxing short-term rentals

Massachusetts Governor Charlie Baker has signed a bill into law that will regulate and tax short-term rentals in the state for the first time.

Starting July 1, short-term rentals in Massachusetts must register with the state and hosts must collect the 5.7 percent state room occupancy tax from guests and remit it to the state. Municipal governments also have the option to impose additional local lodging taxes of 6 percent on short-term rentals. Boston has already passed an additional local lodging tax of 6.5 percent.

Short-term rental operators in cities that are part of the Cape Cod and Islands Water Protection Fund may be required to collect an additional 2.75 percent city tax, and cities may also levy a 3 percent community impact fee on short-term rentals that are professionally managed.

Under the new law, short-term rental operators are also required to have $1 million in liability insurance.

The law will require short-term rental platforms to register with the state, report the total rent/revenue of operators to the state, and notify operators when taxes are remitted for them.

While short-term rental platforms including Airbnb and HomeAway collect lodging taxes on behalf of their hosts in some states, neither do so yet in Massachusetts. This means that short-term rental operators are responsible for registering with state and local authorities, collecting state and local taxes, and remitting taxes to the proper authorities. MyLodgeTax can automate and simplify compliance with the new tax rules for all Massachusetts short-term rental hosts.

The new law is that latest version of a bill that passed both houses of the Legislature this summer, but was sent back for changes by Baker after the session was over. The signed version exempts short-term rentals from registration, liability insurance requirements, and lodging taxes if they are rented for 14 days or fewer in a year. It also limits information available in the new registry to the street name and the city or town where the property is located.

The state law also allows local governments to create their own regulations for short-term rentals. Boston already passed new rules for short-term rentals this summer, some of the strictest in the country. The Boston law, which went into effect on January 1, requires short-term rentals to be registered with the city and allows short-term rentals to be offered only by owners who live in the properties they rent out, among other restrictions.

However, enforcement of some of the new rules in Boston has been delayed due to a lawsuit by Airbnb. Airbnb objected to part of the ordinance requiring short-term rental platforms to share data with the city and remove any hosts who break the rules, claiming those provisions violate federal laws that protect online platforms from punishment for content.

Airbnb and Boston agreed that those requirements would not be enforced until a judge rules on Airbnb’s request for an injunction while the case proceeds. Enforcement of those rules may be delayed until at least March.