Legislation was signed into law in December, 2018 which expands the room occupancy excise, G.L. c. 64G, to short-term rentals of property for more than 14 days in a calendar year, starting July 1, 2019 for which a rental contract was entered into on or after January 1, 2019.
There were also changes made to the law that apply to operators of lodging establishments that were already subject to the excise, and new rules were added that allow all operators to allow an intermediary or other agent to handle the rental of their property and register with and submit returns and tax due. You can find that law on the General Court Website.
New legislation was recently signed making all changes effective for all operators and intermediaries as of July 1, 2019. You can find the new law on the General Court Website. See 830 CMR 64G.1.1: Massachusetts Room Occupancy Excise (PROPOPSED REGULATION) for more information.
In the meantime, the following provides important information about the new law, including changes for all types of operators, intermediaries, and municipalities.
Who is an operator?
An operator is anyone operating a bed and breakfast establishment, hotel, lodging house, short term rental or motel. An operator can be an owner, lessee, sublessee, the holder of a mortgage, licensee, or anyone else operating a short-term rental. An operator does not have to be a resident of Massachusetts or a Massachusetts-based business for the room occupancy rental rules to apply.
Who is an intermediary or operator’s agent?
An intermediary is anyone besides an operator who helps to arrange a property rental with any operator and who also collects rent. An intermediary can arrange a property rental and collect rent for any operator whether they operate a bed and breakfast establishment, hotel, lodging house, short-term rental or motel.
An intermediary includes a broker, hosting platform, or operator’s agent.
An operator’s agent is anyone who manages a property for rent or books reservations of a property for rent. An operator’s agent includes a property manager, property management company, or real estate agent.
What is a short-term rental?
A short-term rental is an occupied property that is not a hotel, motel, lodging house or bed and breakfast establishment, where at least 1 room or unit is rented out by an operator through the use of advance reservations. A short-term rental includes an apartment, house, cottage, and condominium. It does not include property that is rented out through tenancies at will or month-to-month leases. It also does not include time-share property. A short-term rental is a rental that is not for more than 31 consecutive calendar days. The new law imposes state and local excises on short-term rentals of property for more than 14 days in a calendar year, starting July 1, 2019 for which a rental contract was entered into on or after January 1, 2019.
What is “rent” that is subject to tax?
The total amount of rent that is subject to tax includes all amounts collected by an operator or intermediary from an occupant, in exchange for occupancy. The term “rent” includes all optional charges, including but not limited to insurance, linen fees, cleaning fees, and booking fees. Specifically excluded from rent are:
- Bona fide refundable security deposits;
- Amounts paid by an occupant that were previously reported by the operator as taxable gross receipts for sales or use tax purposes; and
- Amounts paid by an occupant for services offered by the operator on similar terms to non-occupants in the regular course of the operator’s business.
If the total amount of rent is less than $15 per day, no tax is required to be collected.
Who should register?
All operators of short-term rental or traditional lodging properties that are not exempt from state and local room occupancy excise and local fees must register through MassTaxConnect. You can review a list of exemptions under Exemptions in the guidance. An intermediary who collects rent for an operator of traditional lodging or short-term rental properties subject to the excise and fees must also register.
Who does not need to register?
An operator of a property that is exempt from state and local room occupancy excise and local fees, or an intermediary collecting rents for that operator, do not need to register for that property. Please review the list of exemptions under Exemptions in the guidance.
How do I register as an operator?
All operators must register with DOR using MassTaxConnect. Operators will list their properties and receive a registration certificate for each one. Also, operators should be aware that cities and towns may have separate registration or licensing requirements. Check with local officials in the city or town in which the property is located to find out more. See the video tutorial at the bottom of this page for a preview of the new process.
As an operator, how do I register my property on MassTaxConnect if I don’t have a business?
If there is no separate legal entity that owns the property (a partnership, trust, LLC, etc.) then you would register as an individual. Take the following steps:
If you already have an account on MassTaxConnect:
- Log in to MassTaxConnect
- Select “Add Account Type/New location” to register for the Room Occupancy Consolidated tax type
- Select “Room Occupancy Consolidated” (for activity for July, 2019 and after).
If you do not have a MassTaxConnect account:
- Go to MassTaxConnect
- Choose “Create my username”
- Choose “Create my username” again
- Select “I am an individual who has previously filed taxes in the state of Massachusetts”
- Choose Social Security Number as ID type, enter the number, select “Personal Income Tax” as the account type and proceed with the verification process
— You will be asked to provide one of the following: A tax return amount OR a tax refund amount from one of your past three (2016, 2017 or 2018) Personal Income Tax returns.
— The amount must be greater than $0. If you can’t provide a tax return or refund amount, call the Trustee Tax Contact Center at (617) 887-6367 (choose #4, then #3 when prompted).
- After setting up your account password, choose “Add Account Type/New Location” under “I Want To” to register for the Room Occupancy Consolidated Tax.
Are there any exemptions from the excise?
There are a number of exemptions to the excise. For more information on these exemptions, see TIR 19-3: Changes to the Room Occupancy Excise in An Act Regulating and Insuring Short-Term Rentals.
How do I register as an intermediary or operator’s agent?
An intermediary or operator’s agent must register with DOR using MassTaxConnect. Note that intermediaries who already use MassTaxConnect do not need to re-register. They will log in under their existing username and password and just add the Room Occupancy Consolidated account type. Intermediaries will register just once. There’s no need to register separately for each rental property. Check out the video tutorial at the bottom of this page for a preview of the new process.
I am a real estate agent. Do I need to register and file returns as an intermediary?
Generally, a real estate agent works for a real estate brokerage or company and any rent associated with a listing by a real estate agent is collected by the company. In such cases, it is the responsibility of the company to register as the intermediary and file returns on behalf of its agents for all the properties that any of its agents list for rent. Individual agents only need to register and file returns if they are independent agents not affiliated with any company and collect rent directly.
I am an intermediary or operator’s agent. Do I have to register under each operator’s name?
No, you will only need to register one time. When you file your monthly tax return, you will list each property and the rent collected for that property.
Is the intermediary responsible for confirming operator registration?
As an intermediary, you must confirm that the operator whose rent you are collecting is registered with the Department of Revenue through MassTaxConnect and ask for the operator’s certificate number for your return. It’s the responsibility of the intermediary to confirm that operators are registered. We understand that during the transition to this new tax type an intermediary may not be able to obtain operator certificate numbers in time to file the return. Up until November 1, if you don’t have the certificate number, you must instead include the operator’s Federal ID number or Social Security number. As of November 1, all returns must include the certificate number.
I own my property with my brother and the property will be rented as a short-term rental. Does each of us have to register as an operator?
No. Only one owner per property has to register as an operator. The owner who registers as the operator must collect the tax, file returns and remit the tax to the Department if the owners are collecting rent directly. Each owner remains responsible for ultimately making sure the proper amount of tax is collected and remitted.
I only rent my property a few days a year as a short-term rental. Do I have to register or collect the tax?
No matter how many days you rent out your property each year, you must register with DOR using MassTaxConnect. However, if you rent out your property for 14 days or less in a calendar year, you are not required to collect any tax. If that exception applies to you, you must let us know at the time of registration that you will not be renting out your property for more than 14 days.
Return and payment FAQs
When are returns and taxes due?
Room occupancy returns are due monthly, on or before the 20th day of the month reporting the tax due on occupancies in the previous month. The state excise and any local option excise, including the Convention Center Financing fee, the new Cape Cod and Islands Water Protection Fund excise, and any community impact fee are to be paid with the return.
When is the first return and payment due for short-term rentals after July 1, 2019?
Starting July 1, 2019, the first return and payment is due on August 20, 2019. After that date, returns are due on the 20th day of each month.
Who is required to file returns and pay the taxes due?
Generally, all operators are required to collect tax from the occupant and remit these amounts to the Department. An operator may enter into an agreement with an intermediary for the intermediary to collect rent. An intermediary who agrees to collect the rent will also be responsible for collecting and remitting the related tax.
How do I file returns and make payments?
If you collect rent for rentals from July 1, 2019, you will be required to collect taxes, fees, and excise for those rentals, and remit the collections to DOR through MassTaxConnect. There are two options. You can enter information for one property or you can upload a consolidated return for multiple properties using Excel. An Excel template is available for uploading through MassTaxConnect with all the appropriate cells in the appropriate order. If you choose to attach your own spreadsheet, the cells must be in the same order as the template. Information on the return must include a certificate number or Federal ID [or Social Security Number] for each operator along with the name and address of the operator and taxes. See video tutorials for how to file and pay or upload a spreadsheet.
How much tax am I required to collect?
The total amount of tax required to be collected will depend on where the short-term rental is located. The following is a breakdown of the various state and local excises that may apply.
State excise 5.7% (Note that while the statute provides for a 5% rate, an uncodified surtax adds .7% to the rate)
Local option excise 0-6.5% (the rate varies depending on the city or town; Visit the Division of Local Service’s Municipal Databank)
Convention Center Finance fee 2.75% (only for Boston, Worcester, Cambridge, Springfield, West Springfield, and Chicopee)
Cape Cod and Islands Water Protection Fund excise 2.75% (only for those cities and towns in those localities that are currently a member of the Fund)
Community Impact fee 0-3% (the fee is only imposed on short-term rentals and the rate will vary depending on whether a city or town votes to adopt this fee)
As a hotel in Barnstable County, am I required to collect the 2.75% Cape Cod & Islands Water Protection Fund Excise beginning on July 1, 2019 even if it’s for a room booked prior to January 1, 2019?
Yes. For traditional lodgings (bed and breakfast establishment, hotel, lodging house or motel) the date of booking is not important. All taxes and fees that are effective on July 1st must be collected for occupancies on or after July 1st.
What if a city or town increases its local excise rate or imposes a new fee? How does that affect my tax collection responsibilities?
If an occupancy occurs after a rate increases or a new fee is imposed, whoever collects the rent must collect any amounts due from occupants that were not paid prior to occupancy. Lease contracts should include provisions that all state and local taxes and fees are due as of the date of occupancy, so occupants are aware that additional amounts may be due if rate or fee changes occur after a contract is signed. Whoever collects the rent is responsible for the payment of the tax or fee due based on the effective date of the change, not the date a contract was signed or any money was collected.
My short-term rental begins in June 2019 but ends after July 1, 2019. Is my rental subject to tax?
No, the new law imposes tax on short-term rentals that begin on or after July 1, 2019. If your rental begins before July 1, 2019, it is not subject to tax.
For a short term rental, how do I report the exempt rent from contracts entered into before January 1, 2019?
When you file your room occupancy consolidated tax return, include all rents in line 1, total rent. On line 2, taxable rent, do not include exempt rent from pre-January 1st contracts.
I only rent my property at certain times of the year. Do I have to file a return even if I have no rental every month?
No. A return is required to be filed only for any month when tax is due. If no tax is due, no return is required to be filed.
What is a rental contract?
A rental contract is an agreement by an operator, intermediary or operator’s agent to rent a property to an occupant for a certain time period. The rental contract must create a binding obligation between the operator, intermediary or operator’s agent and the occupant.
What records do I need to keep as an operator?
An operator is required to keep records relating to charges and receipts for all transfers of occupancy, as well as copies of returns filed. You can find more information on specific records to be kept by clicking on the Record Retention Regulation link at the bottom of this page.
Besides filing returns and paying taxes due, are there any other responsibilities for intermediaries?
Like operators, intermediaries are required to keep records related to amounts collected and provide those records to the Department upon request. Intermediaries must also make sure the operator they are working for is registered with the Department before collecting any rent from the occupant. It is the responsibility of the intermediary to notify the operator of its responsibility to comply with all applicable municipal, state and federal laws and to report to them any amounts they have collected and remitted to the Department.
As the owner of a bed and breakfast, what does the new law mean for me?
If you paid room occupancy tax previously as a bed and breakfast establishment, the new definition of rent applies to you. If you were exempt as a bed and breakfast home (defined as a private owner-occupied house where not more than 3 rooms are rented, a breakfast is included in the rent and all accommodations are reserved in advance) you will remain exempt from paying room occupancy tax. A bed and breakfast home is not required to register with DOR.
As an intermediary am I responsible for collecting taxes, excise and fees?
If an intermediary collects rent payments, the intermediary is also responsible for collecting and remitting all applicable taxes, fees, and excise associated with the rent. Because the intermediary is responsible for payment of tax, operators do not pay tax on rent amounts that are paid over to them by an intermediary.
Municipal Official FAQs
The Division of Local Services has compiled Frequently Asked Questions (FAQs) to explain the changes for municipal governments.
For information about local rules, including whether a city or town is a member of the Cape Cod and Islands Water Protection Fund or has adopted a community impact fee, please check with local officials in the city or town in which the rental property is located.