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 to DOR on their behalf. 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. DOR anticipates issuing detailed guidance to explain the administration of the new law.
In the meantime, the following provides important information about the new law, including changes for all types of operators, intermediaries, and municipalities.
What is subject to the excise FAQs
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 arrange a property rental with any operator and who also charges rent on behalf of the operator. 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 on behalf of an operator. 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 subject to sales or use tax by the operator; 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.
As the owner of a bed and breakfast, what does this 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.
How do I register as an operator?
All operators must register with DOR using MassTaxConnect. The registration process is under development and will open on July 1, 2019. Click on the video tutorials at the bottom of this page for a preview of the new process.
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. The registration process is under development and will open on July 1, 2019. Click on the video tutorials 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. DOR is currently working on making changes to the registration process due to the new law. Check this page for more information in the near future.
What should I do until I can register with DOR?
Operators, intermediaries or operator’s agents may continue to enter into rental contracts until the registration process is up and running. Such contracts should contain provisions stating that all state and local taxes are due to the operator, intermediary or operator’s agent.
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. DOR is currently working on the registration process due to the new law. Check this page for more information in the near future.
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. DOR is currently working on making changes to the forms due to the new law. Check this page for more information in the near future.
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. However, an operator may enter into an agreement with an intermediary for the intermediary to collect and remit tax the on the operator’s behalf.
How do I file returns and make payments?
As of July 1, 2019, all room occupancy returns and payments of all amounts due with the return must be done electronically using MassTaxConnect.
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)
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.
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?
The new law requires DOR to issue regulations to minimize the administrative burden for certain operators who do not rent their property every month. DOR is currently working on the return filing process. Check this page for more information in the near future.
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 an occupant on behalf of that operator. 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 on their behalf.
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 and how to pay that fee directly to the city or town, please check with local officials in the city or town in which the rental property is located.