Cape Cod Lodging Tax Information
Tax Resources for Short Term Rentals
Massachusetts Tax Structure
Beginning July 1, 2019, state and local room occupancy excise taxes also apply to short-term property rentals for 31 days or less. Massachusetts has a state room occupancy excise tax rate of 5.7%, with additional local room occupancy taxes and other fees, depending on the town you are staying in.
What is my towns occupancy / short term rental tax amount?
The short-term rental rate varies by locality and is the total of the following rates:
- State Tax: 5.7%
- Local Tax: Between 4% and 6% depending on the town
- Cape Cod & Islands Water Protection Fund: additional 2.75% for all towns except Marthas Vineyard, Nantucket and Plymouth
- Community Impact Fee: up to 3% may be assessed locally on professionally managed properties (one of two or more short-term rental units that are located in the same city or town, with the same operator).
How are the taxes paid on my rental property?
Nauset Rental acts as an intermediary to collect the tax and submit it to the state on your behalf. However, as the property owner, you must register with MassTaxConnect.
Short-term rental tax is due by the 30th of each month after your guests depart. For example, if you have four rental periods over the month of August, all the taxes will be due on September 30th. Remitted taxes include state and local taxes, as well as the Cape Cod Water Protection Fund and Community Impact fees (if applicable).
Are there any exemptions to the law?
If you rent your home for 14 calendar days or fewer per year, you are exempt from collecting and submitting taxes to the state. However, you must still register your home with MassTaxConnect.
Annual and long-term rentals, are also excluded from the tax, as short-term rental refers to any rental period of 31 days or less. This exemption would apply to any long-term winter rentals of your property, even if the same property is rented week-by-week in the summer.
Questions about Room Occupancy Excise Tax?
Frequently asked questions about the short-term rental laws can be found on the official website of the Commonwealth of Massachusetts. The Massachusetts Department of Revenue has also provided short video tutorials demonstrating how to navigate the MassTaxConnect portal that are designed for both beginners and experienced users.
Click the link below to explore previous updates and potential impacts of the short-term rental tax bill:
Thanks for coming. So here's the deal with the new Massachusetts short-term (vacation rental) lodging law:
May 20, 2019 Resource Update:
2019 New Insurance Regulations Info
December 29, 2018 Update:
Governor Baker signed the bill into law on December 28th, 2018. Here is coverage from the Boston Globe.
While we are disappointed and feel there will be impacts to the local Cape Cod economy that relies on tourism, we do have a plan to be ahead of these changes and make the most of this for our rental homeowners and guests.
For many properties the tax should be from 12.45 to 14.45% on the Cape depending on the town.
Here is information from Mass Association of Realtors:
What does this new law require?
The new law expands the state's hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). Massachusetts is one of the last states to adopt this type of tax. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, personal, or business use. At the insistence of MAR, the new law only applies to short-term rentals, meaning ordinary tenancies, such as an annual lease or a tenancy-at-will, are not covered by this bill.
The short-term rental rate varies by locality and is the total of the following rates:
Local: up to 6% (Boston 6.5%) - (many Cape towns are at 4% and some are at 6% currently. That said our sources expect towns to raise their tax to 6%. Please lobby your town legislators to consider holding off to measure the impact of this over 10% tax on tourism's effect on the local economy.
Cape Cod & Islands: includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund
A community impact fee of up to 3% may be assessed locally on professionally managed properties (Owners of two or more units in one town).
The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year.
Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration.
When will this law take effect?: July 1, 2019
What about the 2019 rentals I already booked?
The law exempts from tax any 2019 rental that is booked on or before December 31, 2018. Rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019.
Does this apply to the units I rent?As stated above, the new law applies to all rentals for a period of 31 days or less. Ordinary rentals, such as an annual lease or a tenancy-at-will are not covered. The new law applies regardless of whether the owner rents the property themselves, hires a Realtor® to rent the property, or uses an online platform to facilitate the rental.
Do I need to collect the tax?
Most likely, yes. The law requires intermediaries (which includes Realtors® who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department.
Do I need to carry insurance for the listed properties?Owners are required to maintain $1 million dollars in liability insurance to cover each short-term rental. The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors® may elect to offer insurance coverage as part of their services but are not required to.
Before offering a property for short-term rentals, a hosting platform (including Realtors®) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental.
Do the properties need to be registered with the state or city/town?
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.
Are there any inspections required?
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.
December 21, 2018 Update:
The MA legislature surprised mostof us andapproved amodified short-term rental bill Thursday Dec 20th in informal session (witha very small subset of legislators). Basically through somepolitical gamesmanship they pushed this through at thelast minute in secrecy on purpose.At the time of this writing (Dec 21st 9am) the Governor has not weighed in and could still send it back effectively letting the newly elected legislators and others to pick up this matter when formal sessions begin in the new year. Shockingly legislators expect any rental agreement made after Jan 1, 2019 (some 10 days away over the holidays) to include the tax.However we still have no guidance on particulars from DOR, time to implement this technologically, etc. perhaps showing just how out of touch the legislators championing this legislation are and further bolstering the case to wait for a full vote and formal session.We urge anyone with interest in this matter to contact the Governors office immediately via phone (yes people do pick up, i just called myself -just stay on the line to speak with an aid and say you are AGAINST the bill):617-725-4005 orEmail thegovernorsoffice (but this may be less impactfull.)
More information and news coverage here:
Basically the changes from the last version are allowing an exemption for owners who rent less than 14 days a year. However, Mass will require every owner to register with the state (a first in the nation). The time to implement this large change and allow the new legislature to weigh inwould be a key argument for deferring this till the new session. Still no economic studies have been performed and the bill may result in significant job losses on the Cape and Islands further exacerbating challenges of locals.
Sept 2018 Update:
The bill is currently in limbo with Governor Baker sending it back to the MAlegislature with some amendments and the legislature not back in formal session to after elections etc. in January 2019.Its a great time to reach out to legislators as many are up for re-election and they likely won't be voting on this till new session (with newly elected officials in January 2019).
Its possible that something special will happen earlier but the current thinking by many parties is that nothing will happen tillafter jan 1, 2019 (Then it could be rushed through in Jan but there is no way to know at this time).If that this the case the law will likely give owners/managers a few months to implement the new taxes to guests. For example, they could say as of March 15thany new lease needs to include thetax. There is little to no chance it will be retroactive. Therefore its a great reason for owners and guests to book now for the 2019 season!
Here's some great articles/informationfrom some of our friends in the industry:
While we wish it wasn't coming - we are one of the last states without one and we at Nauset Rental anticipate being able to overcome the effects for our owners since our average net increase to owners over market significantly exceeds the maximum amount of the tax. Most likely the tax will come in more in the approx 10-12% range for most localproperty owners (specific rates will dependon the town and number of properties owned). While the guest technically pays the taxwe expect the impact will probably be more split through a 5-6% compression in rates overall in the market. This will not be "the end of the world" and we usually more than offset impact of 5-6% on our program. That said, its one of a significant number of recent headwinds hitting the Cape rental market and will likely most impact local businesses and their workers that rely on tourists.
Late on July 29th2018 the Mass house and senateagreed on a combined billthat will now be sent to the Governor for his signature or feedback.
There isa 5% state tax, up to 6% local tax, and 2.75% wastewater tax, or potentially a tax of 13.75% AND there isa potential3% additional community impact fee. Also, the bill includes statewide registration of your rental property andinspections conducted by the towns with costs paid by property owners.
It is unlikelyGovernor Bakerwill reject the bill outright. Therefore,we urge you to reach out to the governor's office today (the Governor may move on this in hours not days, its very easy to call his office) and provide suggested edits (some below for you to consider).
Call Governor Baker's office at 617-725-4005 (yes, someone does pick up and they do record feedback) OR Email the governors office.
Here are some suggestions for mitigation:
Exempt homeowners who rent for fewer than 90days of the year.
Reduce the amount of the tax for single home rental owners.
Phase in the tax. A sudden approx 15%+ increase is dramatic andwill impact demand harming the Cape economy which relies on tourists. Rental owners will inevitably feel an impact through lower bookings, need to reduce rates, etc. Recommend phase in of any taxes over 5 years to limit shock to the tourism dependent economies and local workers and assess impact.
Eliminate the propertyinspection requirements which add little value in mature vacation rental markets and put significant burdens on towns that are not equipped to perform inspections efficiently and to enforce regulations fairly, uniformly etc.
Delay the bill until proper Economic studies can be completed (no studies have been done by independents (legislators have relied on studies funded by the competing hotel industry etc.)to assess the impact on mature vacation rental markets like Cape Cod that have long relied on tourists to support the Economy).
The bill in its current form will in my opinion have a significant impact on Cape rentals (reducing demand and prices, right when we face other challenges). Additionally, regulations proposed will be a mess for towns to implement and increase hassles of renting and costs. Perhaps most importantly - politicians aren't informed by economic studies and have no sense of how this might effectlocals who are trying to make ends meet in vacation destinations hardest. The waitresses, bartenders, landscapers, restauranteurs, retail owners etc. all are primarily supported by tourists and even a 3-5% drop in business could be very difficult for them to absorb.
BACKGROUND (Ie: how we got here).
- While a short term rental lodging tax (on vacation rentals) has been considered for many years, all key stakeholders (including those who oppose the tax) now believe something will be passed in 2017/2018. In fact, legislators will begin final deliberations in September and October 2017
- Tax ranges from approx. 10 to 18%+ and includes new regulations such as home inspections administered by towns who may lack resources to do so efficiently
- There have been no legitimate economic studies of the impact of this tax on our beloved Cape community.
- The good news is we do have a chance to influence what the final bill with modifications such as a slow down of the process to perform adequate studies, phase in of tax, exemptions for properties renting under a certain number of days or for residents, allocation of tax revenue, and reduction in new regulatory requirements such as inspections.
- Legislators have told us that we do have an ability to influence 3 key areas in particular: phase in of tax, regulatory requirements like inspections and potential residency exeptions etc. We also believe we can do more with your help.
- There are currently 4 separate but related bills (more info below under “Current Bills” that will be combined and agreed as they go through the legislative process. While they differ in their exact details common elements of bills include:
- A state level tax of anywhere from 4-8%
- A local component of anywhere from 4-10% max with discretion on exact amount at local level
- New regulatory requirements such as inspections of your home before you can take further rentals.
- We can provide full bill texts and send you updates as things progress by simply entering your email below:
Potential Impacts of the Tax:
*Reduced demand of approximately 10% if tax is fully implemented from vacationers for renting on cape cod creating unrented weeks and reduced rates/revenue for you. Many are already choosing to go elsewhere or trim their travel budgets due to a variety of factors this year.
*Significantly damage the heart of Cape Cod’s economy – tourists who stay in vacation rentals such as yours spend money at restaurants, beaches, whale watches etc. There have been no economic studies of the impact of this tax on our beloved community. By our estimates, over 75% of the tourists visiting Cape Cod stay in vacation rentals. These tourists support all our local business (directly and indirectly). In particular restaurants, beach parking lots, tour operators, retail shops, museums etc. Tourism is the heart of the Cape’s economy and the #1 place tourists stay is in vacation rentals. Hard working locals count on summer tourists to make their living afford to stay on Cape Cod. A reduction in waiter/waitress jobs, town parks/beach jobs, retail jobs, etc. would be devastating to our already struggling younger, working generation.
*Demand this year has already been reduced due to a slowdown in International travelers, new listing site fees and communication restrictions, etc. The hard truth is many homeowners are battling a “perfect storm” right now due to other headwinds. 2017 has already been a “down” or tough year for vacation rentals for many on Cape Cod – even in the peak month of July. We have found there are several potential causes, which are not yet well understood such as:
- Large listing sites are making it more difficult for travelers to connect with individual home owners to book and imposing their own fees (mandatory for the first time in 2017) on travelers and individual owners that range from 8-15%
- International travel is down this year, likely due to changes at the Federal level, increased customs/border control wait times, etc.
- Concerns with Sharks in the news and allowing their children to swim in the ocean. The Jersey shore is fully back online after Hurricane Sandy.
- Northeastern travelers are cutting back, which some believe is due to political uncertainty of some in major source states of Mass, CT, NY.
- Guests have been extremely price sensitive this year. Many rate cuts had to be made to entice travelers to book. It is simply not true that an added tax will not cause a corresponding reduction in demand. As the Massachusetts association of Realtors has said, if owners and managers could charge more for rentals and get guests to pay it – they would. In economic terms this is called “elasticity of demand” and there is simply no evidence supporting some claims that prices are completely “elastic” and that a 12%+ increase will result in absolutely no reduction in vacation rental demand.
*Many second homeowners may decide its not worth the hassle and expense of renting. Already renting is not easy – these added regulations and taxes will be the “straw that broke the camels back” for many homeowners who simply do not need to rent but do so to get some income to maintain their properties (using local companies and workers to do the work) and because they don’t like the idea of their houses just sitting empty most of the year. Getting people in these homes helps the entire cape economy. The number of workers directly supporting just the vacation rental homes themselves is large. Cleaners, vacation rental manager staff, trash/recycling providers, etc. all count on this industry to provide jobs in our community and if owners don’t rent some of these jobs will be lost.
Consider this potential headline in 2018: Cape Cod economy drops by over 8% this summer leading to restaurant, store closings and increased difficulty for working locals to make ends meet. Lets help our legislators avoid a blunder and protect our economic vitality.
We have indications from legislators that hearing from all of us does help and there can be significant modifications before this is finalized.
What You Can Do:
- Send a quick email to your elected state representatives. Just enter your email below and we will send you a great draft email that you can either simply forward or edit as you see fit and send
- Call your elected state representative’s office. Typically one of their staff will answer and your call makes a big difference.
- Write a letter to the editor of the Cape Cod Times or Cape Codder.
- Join the cause! We are building an economic model that can be refined over time to better understand the economic impacts of the tax on the cape economy. Your discussions with guests and data such as your rates achieved etc. could greatly help this model so let us know if you want to contribute which could be as simple as answering a few questions. You can email us at [email protected].