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Sep 10 2017

Minimizing the impact of a lodging tax

This month, the state legislature will continue its discussion of a bill to expand the lodging tax to short-term rentals.  On several occasions, both publicly and privately, we have voiced our concerns that a sudden 11.7% increase in rental rates will adversely impact tourism on the Cape and Islands. The rental season is short, homeowners who rent are already financially strapped, and vacationers are price-sensitive.  We have heard that several major realtors on the Cape are reporting a significant drop in rental business this season, and this is even before a lodging tax that would increase rates by 11.7%. 

Gov. Christie recently vetoed a similar lodging tax in New Jersey, citing that he felt it would be bad for the state’s economy.

Unfortunately, we’ve been advised that some form of lodging tax on vacation rentals is very likely to pass.  With that in mind, we recently contacted legislators, including Rep. Aaron Michlewitz, Chair of the Joint Committee on Financial Services and sponsor of bill H3454, a list of ideas for possible mitigation to soften the blow:

  • Phase in the tax over a period of years so that vacationers do not go from 0% tax to 11.7% overnight.
  • Start with either the state or local option tax, and then phase in the other one.
  • Exempt homeowners who move out of their primary residence to rent their home.
  • Tax only those homes that are available as short-term rentals year round, not those that rent only seasonally.
  • Keep the reporting simple, either quarterly or semi-annually. Do not require reporting during quarters when no rental income is being received.   
  • Make any regulations be local options.  One size does not fit all.
  • Have the bill apply only to those leases executed after the effective date of the tax. Many leases are signed months prior to the summer, and therefore it would be difficult, if not illegal, for tenants to pay additional monies after they signed the lease. 

We also informed Rep. Michlewitz that 3,000 of the homes currently listed on our site, or 73%, are owned by MA residents.   In addition, 45% of this year’s vacationers are from within Massachusetts. Thus, this bill will primarily be burdening MA residents.

We have recently received an email response from Senator Cyr, who appreciated our recommendations for mitigating the impact of the bill (outlined above). He wrote that, “It still looks like debate will commence in the fall (likely October) starting with the House followed by the Senate.”

If you have additional ideas for mitigation, you might email them to your local legislators and/or Representative Aaron Michlewitz, sponsor of Bill H3454.

We’ll keep you posted if/when we learn anything more.

Minimizing the impact of a lodging tax
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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

2 comments

  1. Nancy Vail

    Thanks for all your hard work, Joan & Jeff! Maybe we’ll get 1 more year of a reprieve….I was at the Brewster meeting in June and it was clear that this is a thing. Have you been in contact with anyone in the Berkshire’s? Are they lobbying as hard as you are?

    Best,

    Nancy Vail
    Wellfleet

  2. steve daley

    What about getting signatures to possibly stop this legislation?? I thought is was sponsored by Sarah Peake ???

    the recommendations are great and specific……is there no other way to stop this…such as getting Baker to veto it?

    Where does he stand on the issue? Obviously Christie killed the bill, these are all Dem’s pushing the tax button, we need the Republican backing to get it defeated.

    just my thoughts……

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