Updated on May 23, 2019
We will continue to update these FAQs as we learn more.
Vacation Rental Tax FAQs
What does the new law require?
The law expands the state’s hotel and motel tax to include the short-term rental of homes and condos. “Short term” refers to any rental period of 31 days or less, so annual or long-term rentals are excluded from the tax.
When did the tax go into effect?
The tax went into effect on January 1, 2019. Any lease signed on or after this date for a rental term beginning July 1, 2019, or later must include the rental tax.
Is the tax retroactive?
Any lease that was signed prior to January 1, 2019, does not have to include a tax, and the tax is not retroactive.
What if a city or town increases its local excise rate or imposes a new fee?
According to the DOR, in the event that a town increases its local rate (as of this writing, Orleans, Bourne, and West Tisbury have recently voted to increase their rate), it’s the responsibility of whomever collects the tax to collect the full amount from vacationers prior to their arrival. Even if the full original amount of the tax has already been collected, they must go back to the vacationer and request the additional amount due. According to the DOR website, “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.”
How much is the tax?
The tax is the total of these taxes:
- State tax: 5.7%
- Local tax: up to 6%. View a chart of Short-Term Lodging Tax Percentage by Town. Note: Many towns, especially those that currently charge only 4%, will be voting over the next few months to change their Lodging Tax rates.
- Cape and Islands wastewater treatment tax: 2.75% (To date, all Martha’s Vineyard and Nantucket and “Just off Cape” properties are exempt.)
- A town can assess an additional 3% if the homeowner owns more than one rental home in the same town.
Are there any exemptions to the law?
You are exempt from the tax if you rent your home for 14 days or fewer per calendar year. You are still required, however, to register your home and provide insurance. (See below for more details about insurance requirements). “Short term” refers to any rental period of 31 days or less, so annual or long-term rentals are excluded from the tax.
Who will collect the tax?
Whoever collects the rent from the tenants is responsible for also collecting the lodging tax as a separate fee. It could be collected along with the initial deposit or when the balance of the rent is paid. You will have to keep track of the tax and set it aside and remit it to the state at a later date. Operators of short-term rentals must register with MassTaxConnect on or after July 1, 2019 when registration will be available.
How will the taxes be remitted?
The Department of Revenue is expected to issue regulations regarding how and when to remit the tax to them. The state would retain their 5.7% and remit to each town what is due to them.
What items are taxable?
Taxable items include the rent and any other non-refundable charges, including cleaning, linen, or pet fees.
Should I absorb any of this tax myself?
No, the lodging tax is meant to be paid by the renters, just like they would pay the tax at a hotel or motel.
A lodging tax for private rentals is common in many parts of the country, including every other New England state, so vacationers are becoming increasingly accustomed to paying one. And keep in mind that renters will have to pay this tax no matter which home they choose.
How should I present the tax on my listing?
We now provide this language on all listings: “State and local taxes of X% will apply.” The exact percentage is determined by the town in which your rental home is located. This language is posted on your listing at just below the pricing chart near the top of your listing as well as at the top of your Pricing and Availability section. But you should NOT incorporate the tax within the rates posted on your Calendar. If your guests are exempt from the Lodging Tax due to your only renting for 14 days or less per year, please let us know so that we can update your listing accordingly.
Which homes are subject to the Wastewater Tax?
Only the 15 towns in Barnstable County are subject to the Wastewater Tax. The Vineyard and Nantucket are not part of the Cape Cod and Islands Water Protection Fund, and until and unless they opt into the Trust by majority vote of town meeting, they will not collect the 2.75%.
Any homes located in Off-Cape towns are also not subject to the Wastewater Tax.
How can I determine what amount my town is assessing for the local tax?
For a full list of towns listed on our site and what percentage they are each assessing, see our blog post Short-Term Lodging Tax Percentage by Town.
Do I need to register my home?
Yes, you will be required to list your home on the state short-term rental registry even if it’s exempt because you rent for 14 days or fewer. Operators of short-term rentals must register with MassTaxConnect on or after July 1, 2019 when registration will be available.
Your town may also require a separate registration and registration fee. See a list of the towns that currently require registration.
How do I register my home with the state?
Operators of short-term rentals must register with MassTaxConnect on or after July 1, 2019 when registration will be available.
Are safety inspections required?
Towns may implement a health and safety inspection requirement and determine the frequency of the inspection. Homeowners would be required to cover the cost of the inspection.
Am I required to carry insurance for my home?
The new law requires homeowners to maintain $1 million dollars in liability insurance to cover a rental home. The coverage is required to defend and indemnify the owner and any tenants in the home for bodily injury and property damage. Check with your insurance agent to be sure that you have adequate insurance coverage. If your carrier does not provide the required $1M liability coverage, take out an umbrella policy such as the one offered by AAA to supplement your current policy. Or switch to a different provider such as Proper Insurance (a subsidiary of Lloyds of London), designed specifically for short-term rental properties.
When are the taxes due?
According to the Department of Revenue, starting July 1, 2019, the first return and payment are due on August 20, 2019. After that date, returns are due on the 20th day of each month. The state excise and any local option excise, including the new Cape Cod and Islands Water Protection Fund excise, are to be paid with the return.
Should renters send a separate check for the taxes?
It is not necessary for renters to send a separate check for the taxes. Whether by check or credit card, the taxes could be combined. Homeowners are responsible for keeping track of the tax, however, so that they can remit it by the required date.
The new Dept. of Revenue FAQ’s web page: https://www.mass.gov/info-details/short-term-rentals-frequently-asked-questions#overview-.
Jennifer DeSimone, constituent services manager on this new law firstname.lastname@example.org . (617) 887-6367
8:30 a.m.–4:00 p.m., Monday through Friday
Text of the new law: https://malegislature.gov/Laws/SessionLaws/Acts/2018/Chapter337
Sen. Julian Cyr
Boston Office 617-722-1570, District Office 508-237-7001. Email Julian.Cyr@masenate.gov
Contact info for Cape and Islands Legislators: https://capecodwomenforchange.com/cape-cod-and-islands-state-legislator-contacts