Bill would expand room tax for vacation rentals

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A bill that would enable communities to raise revenue by taxing condominiums and private homes that are used as vacation rentals was reintroduced in early February.

Currently, the room-occupancy tax – which totals 9.7 percent, with 4 percent going to the municipality and 5.7 percent to the state – can be applied only to hotels, motels and bed-and-breakfast establishments. House Bill 863, introduced by Rep. Cleon Turner of Dennis and six other legislators, would give cities and towns the option of extending the tax to “any vacation or leisure accommodation” that is rented for 90 days or less.

The local option is seen as especially beneficial for communities on Cape Cod, where the use of private homes and condos as summer rentals is widespread. Turner’s office projects that Chatham would see an additional $1 million in revenue from the local-option tax. Estimates for other communities include Brewster, $900,000; Yarmouth, $800,000; and Dennis, $600,000.

Brewster Selectman Ed Lewis said some Cape Cod towns have experienced a decrease in revenue from the occupancy tax over the years, due to the declining use of hotels and motels as vacation rentals.

“Nobody is building hotels and motels on Cape Cod these days,” he said.

In most other states, including New Hampshire, Maine and Vermont, occupancy taxes already apply  to condominiums and private homes that are rented as vacation residences, Lewis said.

Turner’s bill closely resembles a measure that was filed last year but never made it to the House floor. One addition is a section that would exempt housing for seasonal workers from the tax. The new version of the bill also makes it clear that the owner of a property – not the rental management company – would be responsible for reporting and paying the tax.

The MMA has endorsed the local-option tax on vacation rentals as part of its municipal relief legislation, which includes spending reform proposals.
Written by MMA Associate Editor Mitch Evich