If you plan to rent your house this summer, be prepared for a change in the State Law effective July 1, 2019. On December 28, 2018, Governor Baker signed An Act Regulating and Insuring Short-Term Rentals which sets forth a comprehensive framework for the regulation of short-term rentals. The new law has several new requirements including registration, the payment of both State and local taxes, payment of fees and insurance.
A short-term rental includes an apartment, house, cottage and condominium rental where at least one room or unit is rented out by an operator through the use of advanced reservations. The Act includes regulation of online rental companies such as Airbnb, Flipkey and VRBO. Hotels, motels, lodging houses and bed and breakfast establishments are not considered short-term rentals.
All short-term rental operators will be required to register with the Massachusetts Department of Revenue (“DOR”). Operators may then choose to allow an intermediary or other agent to handle the rental of their property who can register and submit returns and taxes due to DOR on their behalf. The State will maintain a short-term rental registry that will be accessible to the public.
The new law imposes State and local excise taxes on short-term rentals that are rented for more than fourteen days in a calendar year starting on July 1, 2019. This taxation will apply to any rental contract entered into on or after January 1, 2019. Short-term rentals will be required to pay the 5.7% State excise tax rate to the DOR and additionally, communities can add local taxes of up to 6.0%, and 6.5% in Boston.
There are also new insurance requirements under the Act. Operators of short-term rentals are required to maintain liability insurance of not less than $1,000,000 to cover each short-term rental, unless such short-term rental is offered through a hosting platform that maintains such coverage.
Finally, local municipalities may charge an additional community impact fee of up to 3% on certain short-term rentals. There are some other fees that are permitted by certain municipalities and these fees, unlike the taxes, are paid directly to the municipality. The law also allows for local regulation and fines for violations of local laws. If you have any questions regarding local fees or regulations, it is strongly advised that you speak with your local municipality.