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 new law (Chapter 337 of the Acts of 2018) takes effect July 1, 2019, and applies to rentals for not more than 31 consecutive days. The highlights of the law are as follows:
- 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.
While all short-term rental operators must comply with the new state regulations, local requirements will vary town by town. Communities may impose additional local taxes and fees, but are not required to do so. However, the local tax automatically applies to short-term rentals as of July 1 in communities that previously adopted a room occupancy tax. Not sure of your community’s status? Check the Department of Revenue’s database.
In addition to taxes and fees, the new law provides specific authorization for local 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.