State short-term rental regulations finalized
December 4, 2019 Government & Community Affairs
The Department of Revenue (DOR) just released the final version of its Short-Term Rental Regulations. This final version includes some key changes that were a direct result of advocacy by Realtors® from MAR and the Cape Cod & Islands Association of Realtors® who testified on proposed regulations this past summer.
CCIAOR, MAR, and our Vacation Rental Committee will continue advocating on the regulations and statute, most notably seeking further clarification on the insurance requirements that are not addressed in the final regulations.
Here’s what you need to know:
The two biggest changes that Realtors® successfully advocated for were:
- Realtors® can provide mandated insurance - This means that Realtors® who provide services online, (or via phone application or similar electronic processes) that allow short-term rental operators to list their property and collect rent, and a allow a person to make a reservation, will be able to provide the operator the $1 million in liability insurance required by statute.
Previously: Under the old version of the regulations, only online service providers such as AirBnB, Expedia, HomeAway, or VRBO could provide this insurance.
- Removal of the Mid-Stay Rate Change Requirement - New or amended tax rates will take effect only for subsequent transfers of occupancy. For example, if a town adopts a new tax effective July 6, occupants who have rented the property from July 3 to July 10 would not have to pay the new rate even though it will change during their occupancy. However, the occupant whose stay begins on July 10 (and all subsequent occupants) will need to pay the new rate.
Previously: The original regulations required short-term rentals to adjust the tax rate in the middle of an occupancy when municipalities would adopt or amend local taxes.
14-Day Exemption is Clarified
- A property is exempt from the short-term rental tax if it is rented for 14-days or less per calendar year, the operator registers with DOR, and files a declaration stating that they intend to rent their property for 14-days or less.
- An operator with multiple properties can qualify for an exemption at each of them.
Reputation of Realtors® is Protected
- The final regulations clarify Realtors’® responsibilities related to the 14-day exemption and removes the need for Realtors® to collect taxes from occupants after their stay.
- Realtors® who contract with an operator to list a property are instructed to presume that they should collect tax unless they are informed by the operator that the property falls under the 14-day exemption.
- If a Realtor® is told by an operator that the property is exempt under this rule, but the Realtor® ends up renting the property out for more than 14-days in the calendar year, the Realtor® is responsible for collecting and remitting rent beyond the initial 14-days.
- The operator is responsible for collecting and remitting tax for the previously (but now no longer) exempt initial 14-day period.
Tax Itemization Clarified
- DOR clarified that taxes must be itemized as laid out in Section 11(e) of the regulations, not as shown in examples following Section 5.Note: MAR requested this clarification in its comments.
- MAR recommends using its uniform short-term rental lease to assure compliance with the law and regulations.
Expands Accepted Forms of Identification for Tax Returns
- While Realtors® are still required to assure that operators with whom they contracted are registered with DOR, they can submit returns using the operator’s certificate number, federal Employer Identification Number (EIN), Social Security Number (SSN), or other identifying information approved by DOR.
Notification Requirement Clarified
- The new regulations specify that this Realtors® must notify operators within 30 days of filing a return.
- This notification must include an itemization of the date of each occupancy, the rent imposed on each occupancy, including any booking fees charged, as well as amounts of all state and local excises and any applicable local fees collected and remitted to the Commissioner on behalf of the operator.
Requires Accounting Consistency
- The final regulations contain new language requiring reasonable and consistent accounting methods as well as adjustments for any filed returns that use different methods in order to prevent double-counting or omissions.