Massachusetts vacation rental tax guide
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With a bounty of popular destinations including Boston, Cambridge, and Cape Cod, the Bay State offers ample opportunity for short-term rental (STR) businesses.
But these opportunities come with tax obligations. Like hotel stays, STRs in Massachusetts are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you.
Avalara MyLodgeTax compiled this guide to help you comply with Massachusetts lodging tax laws at the state level. Local jurisdictions such as cities or counties may have their own lodging tax rules. For more information on the tax rates and jurisdictions that apply to your rentals specific location, use our lodging tax lookup tool.
No lodging tax guide is a substitute for professional tax advice. Consider it a resource to help you understand and prioritize your lodging tax questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Massachusetts tax laws.
Lodging tax basics
Lodging tax is calculated as a percentage of the total rent of your guest’s stay and added to the guest’s bill. The guest pays the tax, but the STR operator is responsible for collecting and paying it to the proper tax authority.
What is the definition of “short-term rental” in Massachusetts?
In Massachusetts, lodging taxes apply to short-term rentals of property for 31 days or less. If the total amount of rent for a short-term property is less than $15 per day, no tax is due.
An STR is an occupied property that is not a hotel, motel, lodging house, or bed-and-breakfast, where at least one room or unit is rented out by an operator through the use of advance reservations. This does not include time-share properties or properties that are rented out through tenancies at will or month-to-month leases.
Who’s required to collect and file lodging taxes on short-term rentals in Massachusetts?
If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling for more than 14 days a year, you’re responsible for collecting, filing, and remitting lodging taxes to Massachusetts authorities. Intermediaries or other agents collecting rent, including STR marketplaces such as Airbnb and Vrbo, are required to register with the state, collect taxes from guests, file returns, and pay taxes. However, operators are still required to register with the state Department of Revenue even if all their transactions go through an intermediary.
Location is key to compliance
The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.
Use our lodging tax lookup tool to get a rate report specific to your Massachusetts rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.
Local short-term rental regulations
STR operators in Massachusetts should be aware of local regulations that apply to them, including rules covering:
- Legality
- Permits, licenses, and registration
- Zoning
- Advertising
- Neighborhood notification
- Building and housing standards
Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.
Registering with state authorities
Before you can begin collecting taxes on your STR in Massachusetts, you’re legally required to register with the Massachusetts Department of Revenue (DOR). You can register online.
No matter how many days your property is available for rent each year, you must register with the DOR. However, if the property is rented for 14 days or less in a calendar year, you’re not required to collect any tax. If that exception applies to you, you must let the DOR know at the time of registration. If you exceed 14 days of rentals during the calendar year, you’re responsible for paying the taxes that should have been collected for the first 14 days.
Collecting lodging taxes
Once you’re registered with tax authorities, you can start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to Massachusetts short-term rentals?
In Massachusetts, a number of different lodging taxes may apply to your rental, depending on your location. These can include:
| Tax name | Filed and remitted to |
|---|---|
| State room occupancy excise tax | Massachusetts Department of Revenue |
| Local room occupancy excise tax | Massachusetts Department of Revenue |
| Convention center financing fee | Massachusetts Department of Revenue |
| Cape Cod and islands water protection fund fee | Massachusetts Department of Revenue |
| Community impact fee | Massachusetts Department of Revenue |
Tax rates
Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. You can use our lodging tax lookup tool to find the right rates.
What charges are taxable?
In Massachusetts, all amounts charged by an operator, intermediary, or operator’s agent in exchange for occupancy are taxable. This includes items such as service charges, cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Refundable security deposits are not subject to lodging taxes.
What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me?
Marketplaces are responsible for collecting and remitting lodging taxes on behalf of their Massachusetts operators when listings are booked. However, operators are still required to register with the state Department of Revenue even if all their transactions go through intermediaries. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Massachusetts. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes.
In Massachusetts, accommodations that are purchased by federal employees on official business and U.S. military employees on official military orders may be exempt from lodging taxes. A valid exemption certificate is required.
Filing lodging tax returns
After you’ve collected taxes from your guests, it’s time to file your lodging tax returns with the Massachusetts Department of Revenue. In Massachusetts, you can file lodging tax returns and pay the tax online. The Massachusetts Department of Revenue allows credit card payments, but you may be charged convenience fees.
When do I need to file my returns?
You’ll be assigned a filing frequency and due dates when you register with the tax authority. At the state level, monthly due dates are as follows:
| Filing frequency | Due date |
|---|---|
| Monthly | Due the 30th of the month following the close of the filing period. |
I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the Massachusetts Department of Revenue?
Yes. STR operators registered with the Massachusetts Department of Revenue are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.”
Are there penalties for filing lodging taxes late?
Whether you choose to rent through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and STR operators breaking local tax laws. Failure to register with tax authorities and file tax returns in Massachusetts on time may result in late fees, penalties, interest payments, and in extreme cases, legal action.
I’ve been offering short-term rentals without collecting lodging taxes. What options do I have?
If you’re already operating an STR but not collecting lodging taxes, you may be in violation of Massachusetts tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.
STR hosts in Massachusetts may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Massachusetts Department of Revenue. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.
Are there options for outsourcing lodging tax filing?
Yes. Many STR operators in Massachusetts file several state and local lodging tax returns each year. Filing solutions such as Avalara MyLodgeTax can help reduce this burden.
