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May 11 2016

Growing Support for Lodging Tax

LodgingTax_05102016We’ve recently seen renewed interest in expanding the lodging tax to apply to private home rentals in Massachusetts, in part because of the increasing number of AirBnB units in the cities.  The nearly 12% tax (5.7% to the state and up to 6% to the individual towns) would apply to all short-term rentals, as well as to small bed and breakfasts. 

Some lawmakers are concerned that big investors are buying up buildings and renting them out as short-term rental units, thus removing them from the potential inventory of affordable housing.

Even though most of the homes on the Cape and Islands don’t fit this profile, the tax would apply to our homes as well as to the apartments and rented rooms in cities and towns. We would all be considered the same and taxed the same.

Once again, we ask that you contact your state legislators and ask them to consider the potential unintended consequences of this tax. Here are a few points that we believe they should consider before putting this tax through:

  • The average annual rent increase for vacation homes is 2%.  A nearly 12% increase in rent is unrealistic and would force homeowners to absorb the tax
  • Many second-homeowners are already strapped to keep their residences here, and, even now, their rent doesn’t cover their expenses
  • Proponents of the tax believe that vacationers should pay to use town services. But property owners already pay real estate taxes, and visitors often pay the towns for such amenities as beach stickers and permits. 
  • Many vacation rental homes are vacant for a majority of the year, so they do not utilize big budget items such as schools.
  • Rental-home owners already pay a lot more in tax per bedroom to the town than a hotel/motel. Homeowners pay based on property values, while hotel/motels pay based on net income, which is much lower.

What are your thoughts on the lodging tax as it applies to private home rentals? Do you have any recommendations to help fight the proposed tax?

Growing Support for Lodging Tax
11 4.8

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About the author

Joan Talmadge

Joan Talmadge - My husband Jeff and I created WeNeedaVacation.com in 1997, shortly after buying our Cape home. My background includes teaching fifth grade for 8 years and writing and editing educational publications for 15. I get great joy from helping fellow homeowners successfully rent their homes. Jeff and I are proud to have two of our three grown children working for WeNeedaVacation.com, truly a family-run business. For me, the Cape and Islands are magical all times of the year -- whether it's walking on Nauset Beach, playing golf, or enjoying family and friends. Email Joan

15 comments

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  1. Chris

    There is a problem here. I understand the concerns of AirBNB taking up hotel business, but let’s be honest, most hotels on the Vineyard are booked solid. Thus without private home rentals you would not have the amount of visitors that there are currently. As for the spirit of the law regarding big corporations buying up properties for rent, I can understand that. So, if you own several homes and rent them out, then you clearly are a business and maybe this should apply to you. However for most of us we are just trying to offset some costs. We pay real estate taxes, mortgage, fees and we pay taxes on income for rentals, but now we have to become a tax collector. lol as well. Now this becomes a debt owed to us by the renter and if we try and collect it, then we are bound by many laws regarding the collection of debt, which brings a whole host of issues and liability. This is a good law in spirit but the application is to broad.

  2. Alison

    I understand both perspectives. A lot of small inns and B&Bs are barely making it, too. Yet they have to pay these taxes. I can see why they see us second homeowners renting our homes or Airbnbers (we are actually both) as unfairly getting a break from this tax and therefore providing unfair competition. They want to level the playing field. I get that. On the other hand, you all make valid points – we already pay property taxes, bring in business to the local tourist economy (though so do the hotels and B&Bs), etc. I could see a compromise, of say a 6% tax. That might be more palatable for our renters, yet appease the hotels and B&Bs somewhat. I would be willing to pay that. Thoughts?

  3. jerry

    I sent an e mail to Rep.Tim Madden of Nantucket. He was open even giving me his direct office phone to call and talk about this. Look up your Rep. and do the same. It lets them know how voters feel.

  4. John W.

    I am a year-round resident of South Wellfleet, a tradesman and musician. I also operate a sailboat charter. I work hard-and pay substantial property taxes. I have a small cabin on my property which I rent during the tourist season through AirBnb, for a modest price. This makes it possible for people of modest means to enjoy a vacation on the outer Cape-people who cannot afford $350 a night and up for a motel, bed & breakfast, guest house, etc. I and others like me have nothing to do with “investors who purchase buildings” and do short-term rentals from them. If our lawmakers would bother themselves to do their jobs, they could come up with an appropriate mechanism for dealing with that issue. Meantime-putting a 12% tax on our modest rentals is yet one more step-along with our town’s spendthrift ways causing increased property taxes-contributing to the “Hamptonization” of Wellfleet. We need to apply lots of pressure to State Rep. Peake and State Sen. Wolf to put the brakes on this. It won’t be easy-Ms. Peake co-owns a bed & breakfast in Provincetown. Pick up the phones, people!

  5. Nancy Vail

    I am adamantly opposed to this tax. My home is my domicile, the only real estate I own, and I must rent it out in the summer to be able to afford to live here the rest of the year. I rely on the kindness of friends for a roof over my head in the summer.

    I could not raise my rates enough to cover this tax – I simply can’t get that kind of money for my house.

    I pay real estate taxes to the town and income taxes to the State and Feds. This is my home, my private property, and I feel I should be able to do what I want with my house. I am not running a business – I am doing what I MUST do in order to keep it.

  6. Ed Beard

    Joan,
    How much new support is there for this tax legislation? How much support overall?
    Would Governor Baker veto the bill if it made it to his desk?
    Hope that you and Jeff and fam are fine!
    Best,
    Ed Beard

  7. Susan

    I do not support this tax for renting properties on the Cape. We, as property owners , already pay real estate taxes…..so, the town and state want to double dip. The rents on the Cape are too high to begin with and this will make many of the rentals owners stop renting completely. I do not have a solution..it just needs to stop!

  8. Dennis Wiggins

    Joan,

    What would really help is if you could provide the email addresses of all the MA State Senators and Representatives for the Cape and Islands. You might even include the contact information of the bill sponsors so that these arguments can be made directly against them. My fear is that politicians will look at this tax as an additional source of revenue that has been accepted in major cities around the country and that this tax is finally coming to Cape Cod/MA. The best we can hope for is an exemption or reduction for small Cape rentals.

    With the contact information, you could ask every one of your clients to write a very brief letter to all of the Senators and Representatives, asking that the tax be rejected, or not applied to Cape homes, and it is possible that they might listen if enough people write. Most legislation is passed without much input from the public, but if a large number of homeowners object, they may feel that this vocal segment represent a much larger community that has not spoken out, but who will be upset with their vote.

    If you provide the contact information, I will be the first one to write letters against this proposed tax.

    Dennis

  9. jerry S

    Yes, my renters use town services as do I and I pay for them through my property taxes. Besides, when renters are here, I am not using any of these service. Further more, my short term renters bring a lot of money to the Cape’s communities. Tourist dollars are a sought after commodity in all resort areas. Many local residents are employed here as well as many high school and college kids to help serve these summer dwellers.
    Multi-family buildings where apts are rented should be considered hotels and taxed accordingly. Mom and pop cottages should not fit into this category and should be left alone without raising their costs.

    Jerry
    A small land lord.

  10. kathleen werber

    I intend to write to our Vineyard legislators. The points you’ve made make good sense to me. I’m wondering how much my letters will matter, as we don’t vote in Mass.

    Anyone else have any ideas on how to deal with that situation? 12% seems like a very high tax and would really affect our financials. Yikes.

  11. Steve Tait

    I strongly support the implementation of this tax. It is only fair and a much needed revenue source for local communities. The big point you fail to mention is this will make the hiding of rental revenue from income tax much more difficult which is a very good thing. I pay all my taxes as should everyone. FYI we have four condos we rent and I have been collecting lodging taxes on them since 2000 as we market them under a part of a larger accommodations business and we have never once had anyone question the 11.7% tax. This tax is part of renting condos in almost every market across the country and it should be done here as well.

    1. Noni

      Steve. Since you’ve been required to pay this tax for quite a while it seems that you want to make sure everyone else pays the same as you. You said fair. Many people use this home rental business to pay their mortgage, taxes, etc. but aren’t looking to make this a lucrative business. Some need this to survive and stay in their homes (see comment 1). Support this tax and all the taxes that suck the blood from everyone and when the next tax isn’t one you don’t want then good luck. You, and others, have opened the door and when it goes to 20% and more then pat yourself on the back.

  12. kenneth pailler "133222

    Dear Joan
    Years ago I brought up this subject as a problem for the future.
    I still believe it is totally unfair to make individual home owners resposible to collect taxes for cities or towns. Not including the fact that every home would have to get a Board of Health inspection every year.
    I still think that each Town would have to pass the bylaw individually.(not sure) But, enough legislators own rental property that I still think it won.t pass.(for now) If it does ,and is addopted in our town, I will no longer rent out my house.I am not employed by my town

    1. Noni

      Kenneth. We are on the fence whether we would continue to rent. It does help defray the cost of having our Cape house. If it’s 12% this year how much will it be in 2, 3 or 4 years. Once it’s law the greed never ends. I hope the legislators are thinking beyond this moment of instant $. If enough people don’t offer their homes for rent then not as many people will come to the Cape and it will negatively effect all businesses. We are not from MA don’t think our concerns count. We get to pay the taxes but not vote for anything that effects us locally. How will they govern this? We give weeks to family and friends and don’t plan on paying an estimated tax for their stay.

  13. Noni

    Hi Joan. We appreciate you being on top of concerns like this. As a second homeowner (12 years), we feel we have contributed substantially to the local economy. We use services consistently (trash removal, irrigation, painting, repairs, construction and end of stay cleaning, etc.). Plus, we pay our taxes, dump bills, electric, gas and cable (just like our neighbors). We use our home through the winter/spring and fall (a 7 hr. drive). We recoup some expenses and mortgage in the high season. We also take our family for vacations and give our relatives time away. We bring in extra money to each town by giving guests a special place to stay. We spend a lot of time/money keeping our property nice and current with linens and surroundings. It is an expense every year. This money all goes back to the local economy. We always buy local.. it’s important to us.
    Our town, Dennis, is expecting us to give them money when they can’t even provide enough parking for ourselves, or our guests, to enjoy the beaches. Our local pond (Flax in Dennis) has a “beach” area that is so eroded that it has huge roots and ruts that are a danger to small children. I’ve written, no response. I guess they would rather be sued. In spite of this, we love the Cape. We are seniors 69/70 who find this tranquil place gives us a beautiful moment of peace. It seems, as always, money gets in the way.

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