The answers to the frequently asked questions below about the proposed Lodging Tax are based on our knowledge as of early September, 2018, and on the bill as it originally read in July 2018 when submitted to Governor Baker. We will update these FAQs as we learn more.
How much will the tax be?
More than likely, the tax would consist of the 5.7% state tax, up to 6% local tax (each town will decide on whether to impose the local tax and how much), and a 2.75% wastewater treatment tax for the Cape and Islands. There may be an additional 3% if the homeowner owns more than one rental home in the same town.
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.
You can always negotiate separately with a repeat renter, for example, if they were to take issue with the tax, but, by and large, you should be passing it on to the renter. 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.
What items are taxable?
Taxable items include the rent and any other non-refundable charges, including cleaning fees. Security deposits would not be taxed.
Who will collect the tax?
Whoever collects the rent from the tenants would be 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 would have to keep track of the tax and set it aside and remit it to the state at a later date. Any other details pertaining to the tax collection are not yet determined.
How should I present the tax on my listing?
Once a bill has been passed into law, we will provide a special field on your listing for you to indicate the tax rate. All listings would include this tax. It would be up to you to calculate the amount of tax based on the rental rate and other fees that a renter pays you.
How will I know if my town is assessing the local tax?
We will check with each town regarding the amount of the local tax. Most towns are likely to impose the full 6% local tax, while others might decide on a lesser amount.
Where and when will I send the tax?
You would most likely be required to remit the taxes (state, local, wastewater combined) to the state on a quarterly or semi-annual basis. The state would retain their 5.7% and remit to each town what is due to them.
When will the tax go into effect?
The tax is likely to be approved sometime after January 1, 2019. It might be approved early in the year, but the effective date would probably be several months after the passing of the bill.
Will the tax be retroactive?
The tax would not be retroactive. Any lease that is signed prior to the passing of the tax would not have to include a tax, even if the date of the tenancy is after the passing of the tax.