- Exemptions from Room Occupancy Excise Tax
- Worthless Accounts
- Payment of the Tax
- Abatements/Amended Returns
- Massachusetts and Federal References
Under M.G.L. Chapter 64G, room occupancy excise tax is imposed on the transfer of occupancy, for $15 or more, of any room in a bed and breakfast establishment, hotel, lodging house, or motel for a period of ninety days or less. The tax is required to be collected by the operator of such establishments at the rate of 5.7% of the total amount of rent for each such occupancy. In addition, each Massachusetts' city or town is permitted to levy a local room occupancy excise tax. Recent legislation increased the maximum rate of the local option room occupancy excise 4% to 6% (from 4.5% to 6.5% in the City of Boston). A city or town must vote to adopt this increase no later than August 31, 2009 in order to impose the additional excise starting October 1, 2009. See TIR 09-13 for more information. In the cities of Boston, Worcester, Cambridge, Springfield, West Springfield, and Chicopee, an additional 2.75% tax is levied for convention center funding.
A room occupancy operator is defined as any person or business entity operating a hotel, motel, lodging house or bed and breakfast establishment, including a private club operating sleeping accommodations.
In determining whether your property is an establishment subject to these provisions, the following factors are relevant:
- the establishment provides sleeping accommodations for the lodging of paying guests;
- the typical occupant is a transient or public traveler;
- generally, the occupancy of the room is less than one week;
- the relationship between operator and occupant is not that of landlord and tenant;
- the operation of the establishment is characterized by centralized management with a manager, who oversees the general operation of the establishment;
- the establishment provides maid and linen service for its guests or, if meals are served, the establishment will have the necessary utensils, equipment and facilities for cooking, preparing and serving food for its guests.
A lodging house is defined under Massachusetts General Laws as a house where lodgings are rented to four or more persons unrelated to the operator.
A bed and breakfast establishment is defined as a private owner-occupied house where four or more rooms are rented, a breakfast is included in the rent, and all accommodations are reserved in advance. This kind of establishment is subject to the room occupancy excise. However, private owner-occupied houses where three or fewer rooms are rented, a breakfast is included in the rent and all accommodations are reserved in advance, are defined as a bed and breakfast home and are not subject to the room occupancy excise.
In order to register, complete our online registration accessible from our MassTaxConnect home page.
Exemptions from Room Occupancy Excise Tax
Under M.G.L. Chapter 64G, Section 2, the following room rentals are exempt from the room occupancy excise tax:
- lodging accommodations at federal, state or municipal institutions;
- lodging accommodations at religious, charitable, educational or philanthropic institutions;
- privately owned and operated convalescent homes or homes for the aged, infirm, indigent or chronically ill;
- religious or charitable homes for the aged, infirm, indigent or chronically ill;
- summer camps for children eighteen years of age or under or developmentally disabled individuals; provided, however, that such summer camp which offers its facilities off-season to individuals sixty years of age or over for a period not to exceed thirty days in any calendar year shall not lose its exemption hereunder; and
- a bed and breakfast home. A "bed and breakfast home" is a private owner-occupied house where three or fewer rooms are rented, a breakfast is included in the rent and all accommodations are reserved in advance. However, accommodations at a "bed and breakfast establishment" are taxable. A "bed and breakfast establishment" is defined as a private owner-occupied house where four or more rooms are rented, a breakfast is included in the rent, and all accommodations are reserved in advance.
The occupancy of rooms by employees of any state, its agencies or political subdivisions, and the occupancy of rooms by employees of charitable organizations are subject to tax, whether or not such employees are on official business and whether such employees or their employers made payment for the occupancy.
Room Rentals for $15 or Less or for Greater than 90 Days:
Under M.G.L. Chapter 64G, Section 3, no room occupancy excise shall be imposed if the total amount of rent is less than fifteen dollars per day.
Rooms Rented for Greater than 90 Days:
When the length of the rental has been agreed to in advance, will exceed 90 days, and is evidenced by a writing (that need not be a formal contract), the operator need not collect tax during the period of the occupancy unless, despite the agreement, the rental terminates prior to the ninetieth day. In such a case, the operator must retroactively collect and remit tax for each day of occupancy. If there is no agreement on the length of the rental, the operator must collect tax from the occupant on an ongoing basis and remit any tax collected. For further details, see TIR 07-2.
For purposes of the room occupancy excise tax, a "person'' includes an individual, partnership, trust or association, with or without transferable shares, joint-stock company, corporation, society, club, organization, institution, estate, receiver, trustee, assignee or referee and any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, or any combination of individuals acting as a unit.
Example: An airline contracts with a motel operator for use by airline employees of eight rooms to be paid for by the airline (whether or not the rooms are actually used). The airline is considered the occupant for purposes of determining whether the occupancy exceeds 90 days. If it does so, the operator need not collect the collect the excise on the rental charges to the airline.
Federal Government Employees:
If a federal employee or other federal governmental officer is acting within the scope of his or her official duties for the federal government and in that capacity stays in a hotel, motel or other place of public accommodation, that occupancy is exempt from room occupancy excise. The exemption is available whether the federal government pays directly for the room, or the employee pays for the room and is later reimbursed.
In order to substantiate a claim for exemption, the federal employee occupying the room must provide the operator of the establishment with:
- proof of identification that the occupant is an employee of the federal government, and
- proof that the occupant is traveling at the direction of the federal government during the period of occupancy.
Evidence that the occupant is an employee of the federal government may include such documentation as an official identification card issued by the appropriate branch of government.
Evidence that the occupant is traveling at the direction of the federal government may include such documentation as an affidavit, letter, or other attestation on official stationery, signed by an authorized official of the appropriate governmental office, agency or branch of the military indicating that the employee is traveling at the direction of the government during the period of occupancy. E-mailed documentation with an electronic signature is acceptable.
Operators of hotels, motels or other places of public accommodation must retain copies of this documentation in order to substantiate claims for exemption. If the occupant states that federal agency policy prohibits the hotel from retaining a copy of the federal identification card, then the hotel’s books and records should contain a notation reflecting that the federal identification card has been inspected by a hotel employee, or a copy of alternative identification.
Note: The occupancy of rooms by employees of any state, its agencies or political subdivisions, and the occupancy of rooms by employees of charitable organizations are subject to tax, whether or not such employees are on official business and whether such employees or their employers made payment for the occupancy.
United States Military:
If a United States military employee is acting within the scope of his or her official duties for a branch of the Unites State Military and in that capacity stays in a hotel, motel or other place of public accommodation, that occupancy is exempt from room occupancy excise. The exemption is available whether the military employee pays directly for the room, or the employee pays for the room and is later reimbursed.
In order to substantiate a claim for exemption, the military employee occupying the room must provide the operator of the establishment with:
- proof of identification as an employee of the United States Armed Forces or National Guard, such as an official identification card issued by the appropriate branch of the United States military or National Guard; and
- a copy of the actual military orders, or an affidavit, letter, or other attestation on official stationery, signed by an authorized official of the appropriate military branch or National Guard indicating that the occupant is traveling under United States military orders which encompass the dates of occupancy.
Operators of hotels, motels or other places of public accommodation must retain copies of this documentation in order to substantiate claims for exemption. Based on a memorandum from the Office of the Under Secretary of Defense dated January 19, 2010, copying of a military ID card to obtain state tax benefits is an authorized purpose under 18 USC section 701.
Massachusetts operators of bed and breakfast establishments, hotels, lodging houses, or motels who have remitted room occupancy excise tax to the Department of Revenue (DOR) on accounts that are later determined to be worthless may request an abatement of the room occupancy excise paid on such worthless accounts. An account is determined to be worthless when it is written off as uncollectible for federal income tax purposes under section 166 of the Internal Revenue Code. These abatements are issued without interest and must be filed on Form CA-6, Application for Abatement/Amended Return, on or before April the fifteenth of each year, covering the amount of room occupancy excise determined to be worthless in the prior calendar year.
Operators must include as rents for their room occupancy excise tax return all rentals for the period in which the rentals occur, regardless of whether payment has been received. Operators are not allowed to subtract bad debts from rental receipts.
Any operator who recovers, in whole or in part, a bad debt for which a reimbursement has been received must include the recovered amount in the rental receipts amount of the room occupancy excise tax return covering the period in which the recovery occurs.
Businesses required to file electronically must file Applications for Abatement/Amended Returns electronically.
Operators must complete and remit the appropriate room occupancy tax return(s) to DOR, with payment in full, on or before the due date.
Filing frequency and payment requirements:
Every operator of establishments subject to room occupancy excise tax must file a room occupancy excise tax return and pay the tax due for each calendar month on or before the twentieth day of the following calendar month.
Return filing methods:
MassTaxConnect, Form RO-2, Monthly Room Occupancy Return , or Form RO-2CF, Monthly Room Occupancy Return for Boston, Cambridge, Chicopee, Springfield, West Springfield and Worcester .
Electronically (ACH Debit only) or by check.
Please see Business Options: Electronic Filing and Payment Programs for more information on the various electronic payment and filing options.
Operator, Not Occupant, May Apply for an Abatement:
Massachusetts requires the operator of Massachusetts hotels, motels or lodging houses to collect room occupancy excise. Because the operator and not the occupant actually pays over the tax to the Commonwealth, only the operator is authorized to apply for an abatement of the tax. An occupant may request a credit or refund from the operator who should then file an abatement claim.
Government Entities and Non-Profit Organizations:
State and municipal government entities, including Massachusetts, and non-profit organizations are not exempt from Room Occupancy Excise tax.
Documentation to Submit with Abatement/Amended Tax Return
- copies of all invoices related to the Application for Abatement;
- copies of credit memos or proof of refund/credit to customer;
- copies of the appropriate Proof of Exemption.
Note: State, municipal government entities including Massachusetts and non-profit organizations are not exempt from room occupancy excise.
- document each worthless rental and provide an explanation listing the date the rental occurred, the amount of the rental, the occupant's federal identification number (if available), and all facts pertinent to the determination that the account is worthless.
- M.G.L. Chapter 64G
- 830 CMR 62C.16.1: Room Occupancy Excise Returns and Payments
- 830 CMR 64G.1.1: Establishments Subject to the Room Occupancy Excise
- 830 CMR 64G 3A.1: Local Options Room Occupancy Excise
- TIR 09-13: Local Option Sales Tax on Meals and Local Option Room Occupancy Excise Rate Increase
- TIR 04-30 - Revised Electronic Filing Requirements
- TIR 03-11: Expansion of Mandatory Electronic Filing
- TIR 01-21: Room Occupancy Excise Exemption for Employees of the United States
- TIR 99-9: Tax Treatment of Purchases with U.S. Government Bankcards
- TIR 98-1: Room Occupancy Exemption for Employees of the United States Military Traveling on Official United States Military Orders
- LR 82-18: Meals and Rooms Provided to Employees of Government Agencies and Charitable Organizations
- AP 102: Diplomatic/Consular Exemptions
- AP 101: Exemption from Sales Tax
- I.R.C. § 166