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Governor Baker recently signed "An Act Regulating and Insuring Short-Term Rentals", imposing new taxes, registration and inspection requirements, and other rules governing the short-term rental of homes and residential units through Airbnb, VRBO, and similar platforms. The law takes effect on July 1, 2019, but municipalities may start planning now to implement certain aspects of the new law.
Overview:
- State excise tax of 5%, plus a .7% surtax on the total amount of rent.
- Optional local excise tax of up to 6% (additional amounts in Boston and the Cape & Islands).
- Optional local impact fee of up to 3% on certain units (up to 35% of revenue from the fee must be dedicated to affordable housing or local infrastructure projects).
- Mandatory state-wide registration system.
- Optional local registration programs and inspection requirements.
- Mandatory insurance requirements.
- Operators renting for 14 days or less each year are exempt from excise taxes and impact fees, but are subject to registration, inspection, insurance, and other requirements.
Municipal Options:
The local taxes, impact fees, and regulatory requirements only take effect by town meeting or council vote. Adoption of the local excise tax and impact fee may take place prior to July 1, 2019, as specified in the new law. The local tax automatically applies to short-term rentals in communities that previously adopted a room occupancy tax. Not sure of your community's status? Check the Department of Revenue's database.
By statute, the effective date of the local excise tax is the first day of the calendar quarter following 30 days after the vote of acceptance, or the first day of a later calendar quarter if specified in the vote. In order for the local excise tax to take effect on the earliest possible day, July 1, 2019, the town meeting or council vote must take place by May 31, 2019.
In addition to taxes and fees, the new law provides specific authorization for bylaws and ordinances to regulate short-term rentals with respect to:
- Regulating the existence and location of short-term rentals, including the number of local licenses or permits that may be issued to operators and the number of days a person may operate and rent out an accommodation in a calendar year.
- Establishing a local licensing or registration system.
- Requiring zoning and code compliance for any short-term rental.
- Requiring health and safety inspections and inspectional fees.
- Imposing penalties for violations of local requirements.
Please reach out to a member of our Public and Municipal Law team for additional information.
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