Details on the Short-term Rental Tax

Massachusetts General Law c.64G, §3A (Occupancy Tax) has been amended to include short-term rentals1 among the list of establishments subject to the local excise tax. The new tax will apply to a change of occupancy starting on or after July 1, 2019, that is booked on or after January 1, 2019. 

The tax affects all short-term rentals whether they are booked through firms like Congdon & Coleman, online rental websites or direct with homeowners.

The amount of the tax which will apply to Nantucket rentals has not yet been set. The maximum potential tax is 17.45% however, based on guidance from Congdon & Coleman's local and state contacts, we expect the final tax rate will be set at 11.7%

Congdon & Coleman's leases will include the following taxes:

State Tax  5.7%
Local Excise2 6%
TOTAL 11.70%

Taxes and fees for the Cape and Islands Water Protection Fund3 and Community Impact Fee4 will not be added.

Irrespective of what you might hear or read elsewhere, the tax will apply equally to all short-term rentals whether they are booked through firms like Congdon & Coleman, online rental websites or direct with homeowners.Until final decisions have been made about the tax rate, 

Aside from the tax, what else does this law entail?
 Each short-term rental unit is required to be listed on the state's short-term rental registry. The process for registration has not been established. We will inform our homeowner clients when details become available.

Additionally, every homeowner that rents out their property must carry not less than $1 million of liability coverage for each stay unless the hosting platform provides equal or greater coverage. Contact your insurance agent to ensure that your homeowners insurance policy is sufficient.

Who collects the tax and remits to the State?
The law requires whoever collects payment for the rental to collect the tax and remit it to the Commonwealth. Congdon & Coleman will collect and remit the taxes for all leases to which the taxes apply. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department.

Which properties and leases are exempt from the tax?

  • Leases entered into prior to January 1, 2019 are exempt.
  • Leases which begin (arrival date) prior to July 1, 2019 are exempt.
  • Leases for stays of 32 days or longer.
  • The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year if the homeowner files a notice with the Department of Regulation saying they will only rent for less than 14 days and will be responsible for paying the taxes themselves if rented for more than 14 days and did not collect it for the first 14 days.

  1 Definition of Short-term Rental

The law defines "short-term rental" as an owner-occupied, tenant-occupied or non-owner occupied property including, but not limited to, an apartment, house, cottage, condominium or a furnished accommodation that is not a hotel, motel, lodging house or bed and breakfast establishment, where: (i) at least 1 room or unit is rented to an occupant or sub-occupant; and (ii) all accommodations are reserved in advance; provided, however, that a private owner-occupied property shall be considered a single unit if leased or rented as such.

 2 Local Excise Tax

The local excise portion of the tax is currently set at 6% however Nantucket's Select Board has put forward a measure which would reduce this portion to 4%. The measure will be voted on at Nantucket's Annual Town Meeting on April 1, 2019. 
Please, speak with your friends and neighbors who are registered to vote in Nantucket about the negative impact this tax will have on homeowners, renters and the island's economy.

 3 Cape and Islands Water Protection Fund

Nantucket is included in the Cape Cod and Islands Water Protection Fund which adds a 2.75% additional rooms excise tax to be collected by the Commonwealth for transfers of occupancy of units located in Towns on  the Cape and Islands. Those funds are deposited directly into the Fund and are disbursed by the Management Board to member towns for water abatement projects. Nantucket is not, however automatically included in the Fund.  If the Town wishes to participate in the Fund, the Town will have to take affirmative steps to to request certification of the town's water protection plans.
The Town of Nantucket has not made a decision about whether to pursue inclusion in the Fund.

4 Community Impact Fee

The law authorizes a community impact fee of not more than 3 per cent of the total amount of rent for each transfer of occupancy of a professionally managed unit. A professionally managed unit is defined as  “1 of 2 or more short-term rental units that are located in the same city or town, operated by the same operator and are not located within a single-family two-family, or three-family  dwelling that includes the operator’s primary residence.”
This portion of the tax requires adoption by vote of Town Meeting. 

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We had a very good experience during the entire process. Out Realator was very helpful in all areas, and we had a wonderful vacation week in Nantucket. We will definitely use them again.

Linda E.