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Room Occupancy Excise Tax administered by the Massachusetts Department of Revenue

Massachusetts has a state room occupancy excise tax rate of 5.7%.  Depending on the city or town, a local option room occupancy tax and other taxes and fees may also apply.

The room occupancy excise tax applies to room rentals of 90 days or less in hotels, motels, bed and breakfast establishments, and lodging houses. Beginning July 1, 2019, the room occupancy excise also applies to short-term rentals of property for 31 days or less.  

FAQ's

What does the law require?
The law expands the state’s hotel and motel tax to include the short-term rental of homes and condos. “Short term” refers to any rental period of 31 days or less, so annual or long-term rentals are excluded from the tax.

When did the tax go into effect?
The tax went into effect on January 1, 2019.

What if a town increases its local excise rate or imposes a new fee? How does that affect my tax collection responsibilities?
Some towns have voted to increase the local tax or add a fee. The tax is whatever the rate is at the time of tenancy, not the date when the lease was signed.

This is what the DOR says about an increase in fees or a new fee:

“If an occupancy occurs after a rate increases or a new fee is imposed, whoever collects the rent must collect any amounts due from occupants that were not paid prior to occupancy. Lease contracts should include provisions that all state and local taxes and fees are due as of the date of occupancy, so occupants are aware that additional amounts may be due if rate or fee changes occur after a contract is signed. Whoever collects the rent is responsible for the payment of the tax or fee due based on the effective date of the change, not the date a contract was signed or any money was collected.”

How much is the tax?
The tax is the total of these taxes:

  • State tax: 5.7%

  • Local tax: up to 6%.  View a chart of Short-Term Lodging Tax Percentage by Town. Note: Many towns, especially those that originally charged only 4%, have voted to increase their Lodging Tax rates.

  • Cape and Islands wastewater treatment tax: 2.75% (To date, all Martha’s Vineyard and Nantucket and “Just off Cape” properties are exempt.)

  • A town can assess an additional 3% Community Impact tax if the homeowner owns more than one rental home in the same town.

Are there any exemptions to the law?
You are exempt from the tax if you rent your home for 14 days or fewer per calendar year. You are still required, however, to register your home and provide insurance. (See below for more details about insurance requirements). “Short term” refers to any rental period of 31 days or less, so annual or long-term rentals are excluded from the tax.

How do I register?
You register via the website MassTaxConnect. 

When and how do I remit the tax?
When: as of April 1, 2021, the tax is due to the state via MassTaxConnect by the 30th of the month after your guests’ departures.  So, for example, if you have three rental parties who depart in July, all their taxes will be due by August 30.

How:  to remit the tax, go to MassTaxConnect, log in, and look for the “Make a Payment” link in the “Room Occupancy Consolidated” section.

What form of payment will the Department of Revenue accept?
Payment can be made by electronic transfer from your checking or savings account. Otherwise, if you pay by debit or credit card, there is a 2.35% convenience fee.

What specifically do I make a payment for on the 30th of the month?
You would remit the tax for the taxable rentals that you had the previous month.  The taxes remitted would include state excise and any local option excise, including the 2.75% Water Protection Fund excise. The state will retain its 5.7% and remit the balance to your town.

What if I rent my home by the week in the summer but long term (for more than a month to one party) in the winter?
Your short-term tenants would pay a tax, and you would remit the tax for those months.  No tax would be due for your long-term tenant, nor would you need to file a return for the months of the long-term tenancy.

What items are taxable?
Taxable items include the rent and any other non-refundable charges, including cleaning, linen, or pet fees.

Should I absorb any of this tax myself?
No, the lodging tax is meant to be paid by the renters, just like they would pay the tax at a hotel or motel.

A lodging tax for private rentals is common in many parts of the country, including every other New England state, so vacationers are accustomed to paying one. And keep in mind that renters will have to pay this tax no matter which home they choose.

How should I present the tax on my listing?
We now provide this language on all listings: “State and local taxes of X% will apply.” The exact percentage is determined by the town in which your rental home is located. This language is posted on your listing at just below the pricing chart near the top of your listing as well as at the top of your Pricing and Availability section.  But you should NOT incorporate the tax within the rates posted on your Calendar. If your guests are exempt from the Lodging Tax due to your only renting for 14 days or less per year, please let us know so that we can update your listing accordingly.

Which homes are subject to the Wastewater Tax?
Only the 15 towns in Barnstable County are subject to the Wastewater Tax. The Vineyard and Nantucket  are not part of the Cape Cod and Islands Water Protection Fund, and until and unless they opt into the Trust by majority vote of town meeting, they will not collect the 2.75%.

Any homes located in Off-Cape towns are also not subject to the Wastewater Tax.

How can I determine what amount my town is assessing for the local tax?
For a full list of towns listed on our site and what percentage they are each assessing, see our blog post Short-Term Lodging Tax Percentage by Town.

Do I need to register my home?
Yes, operators of short-term rentals must register with MassTaxConnect (even if you are exempt from the tax because you rent for 14 days or fewer).

Your town may also require a separate registration and registration fee.  See a list of the towns that currently require registration.

Do Martha’s Vineyard and Nantucket require collection of the Wastewater Tax?
No, only the 15 towns in Barnstable County are subject to the 2.75% Wastewater Tax. Nantucket and the Vineyard are not currently part of the Cape Cod and Islands Water Protection Fund. Nantucket may opt into the Trust by majority vote of town meeting

.

Are safety inspections required?
Towns may implement a health and safety inspection requirement and determine the frequency of the inspection. Homeowners would be required to cover the cost of the inspection. Check with your town for details.

Am I required to carry insurance for my home?
The new law requires homeowners to maintain $1 million dollars in liability insurance to cover a rental home.  The coverage is required to defend and indemnify the owner and any tenants in the home for bodily injury and property damage.  Check with your insurance agent to be sure that you have adequate insurance coverage. If your carrier does not provide the required $1M liability coverage, you might need to take out an umbrella policy to supplement your current policy, or switch to a different provider.

Should renters send a separate check for the taxes?
It is not necessary for renters to send a separate check for the taxes.  Whether by check or credit card, the taxes could be combined.  Homeowners are responsible for keeping track of the tax, however, so that they can remit it by the required date.

If I didn’t have any taxable rentals during the previous month, do I still need to file with MassTaxConnect?
No, if you had no taxable rentals during the previous month, you do NOT need to log in and file a “0” payment. The only month for which you need to file are those in which you had one or more taxable rentals.

 

Helpful Rental Tax Resources

Short-Term Lodging Tax Percentage by Town: blog.weneedavacation.com/short-term-lodging-tax-percentage-by-town/

Dept. of Revenue FAQ’s web page: https://www.mass.gov/info-details/room-occupancy-excise-tax

Jennifer DeSimone, Constituent Services Manager on this new law desimonej@dor.state.ma.us


Tax Department (617) 887-6367
Toll-free in Massachusetts (800) 392-6089
8:30 a.m.–4:00 p.m., Monday through Friday

Text of the law: https://malegislature.gov/Laws/SessionLaws/Acts/2018/Chapter337

Sen. Julian Cyr
Boston Office 617-722-1570,  District Office 508-237-7001. Email Julian.Cyr@masenate.gov

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