New Massachusetts short-term rental law starts July 1

Short-term rental hosts in Massachusetts will face new rules and requirements July 1, when a law passed last year goes into effect. It applies to properties that are not hotels, motels, lodging houses, or bed-and-breakfasts in which at least one room is rented for 31 days or less in a year.

The new law requires Massachusetts short-term rental hosts to:

• Register with the Department of Revenue (DOR)
• Collect state room occupancy tax from guests
• File lodging tax returns monthly and pay all taxes due
• Maintain $1 million in liability insurance (unless going through a platform such as Airbnb or VRBO that has equal or greater coverage)
• Inform their insurance provider that they will be operating a vacation rental

Short-term rental operators may also be required to collect local lodging taxes, depending on the location of the rental. The new law also allows municipal governments to impose additional local lodging taxes of 6 percent on short-term rentals. Boston has already passed an additional local lodging tax of 6.5 percent. Cities and towns that are part of the Cape Cod and Islands Water Protection Fund may levy an additional tax of 2.75 percent. Municipalities also have the option of imposing a 3 percent community impact fee on operators who own multiple properties.

Short-term rental operators who rent out their properties for 14 days or less in a year are still required to register with the DOR. However, they’re not required to collect and pay lodging taxes.

The new law also allows local governments to regulate short-term rentals, including such areas as licensing and registration, health and safety, location and density, and more.

New regulations in Boston already went into effect earlier this year. And although some parts of the Boston law are held up in the courts, the city is going ahead with other aspects of the law, including a requirement that short-term rentals register with the city and prohibiting short-term rentals from being offered by owners who do not live in the property.

Under the new state law, short-term rental platforms such as Airbnb and VRBO will be required to register with the state, report the total rent/revenue of operators, and notify operators when taxes are collected from guests and paid on their behalf.

While short-term rental platforms such as Airbnb and VRBO collect lodging taxes on behalf of their hosts in some states, neither do so in Massachusetts.

This means short-term rental operators are responsible for registering with tax authorities, collecting local and state taxes from guests, filing regular tax returns, and paying all taxes owed. The Massachusetts Department of Revenue’s online registration process for short-term rental owners is under development and will open July 1. The first tax return and payment will be due August 20.

MyLodgeTax can automate and simplify compliance with the new tax law for all Massachusetts short-term rental operators. For more on vacation rental lodging taxes in Massachusetts, see our state Vacation Rental Tax Guide.