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Massachusetts again rejects tax on short-term rentals

 Airbnb rentals remain untaxed in Massachusetts ... for now.

Short-term accommodations such as those offered by Airbnb and VRBO are subject to lodging and/or sales taxes in numerous states and localities, including Texas and Madison, Wisconsin. In Massachusetts, however, they are exempt, despite several attempts to tax them.

Governor Charlie Baker expressed support for a tax on short-term rentals in early 2016, but he eventually opposed the tax amid concerns that “burdensome taxes and government bureaucracy” would harm Massachusetts businesses, particularly “a whole variety of rentals that I would never dream of having Massachusetts tax.”

Then, in early 2017, Gov. Baker presented a budget proposal that included a provision to “level the playing field in the accommodations industry” by requiring “those individuals or businesses who are … running hotel-like businesses to collect and remit the room occupancy tax.” The plan would authorize intermediaries such as Airbnb and VRBO to collect and remit applicable taxes on behalf of their clients. Airbnb is a vocal proponent of facilitating tax compliance for its lodging providers, while VRBO encourages hosts to proactively address their lodging tax obligations

Under the governor’s plan, hotel taxes would apply only to property owners who rent rooms or properties for at least five months per year. Yet Gov. Baker’s plan was not the only one proposed. A three-tiered tax, with rates dependent on the frequency of rentals, was under consideration in the House. And a Senate measure sought to apply both the state hotel tax and applicable local lodging taxes to all short-term rentals.

All three measures were ultimately rejected, and the budget signed by Gov. Baker on July 17 does not include a tax on short-term rentals. However, a tax on short-term rentals is likely to come under consideration again next year. According to Representative Aaron Michlewitz, “There is certainly an appetite to get this done, or get this issue resolved, by all parties involved here in the State House” (The Boston Globe).

Taxation vs. regulation

Indeed, one of the main sticking points this year was not the taxation of short-term rentals but rather the regulations that should — or shouldn’t — be imposed on them. Some lawmakers believe short-term rentals provided by homeowners should be subject to the same safety regulations as hotels; some believe they should not, while others want to leave regulations to local governments.

For the time being, short-term rental owners in Massachusetts can do business as usual. Yet change is coming. Automating lodging tax compliance helps keeps short-term accommodations in compliance with tax and licensing rules, so the focus can be on guests, not taxes. Learn more.

photo credit: OuiShare Summit 2012 via photopin (license)

Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.