Short-Term Rental Compromise Bill

The legislature has sent a compromise bill, H.4841, “An Act Regulating and Insuring Short-Term Rentals” to the governor’s desk. This bill would tax and regulate the short-term rental hosts and hosting platforms, such as AirBnB.

The bill establishes a tax on short-term rentals, that is nearly the same as the tax on traditional accommodations like hotels and bed & breakfasts. The tax rate includes the state’s 5.7% room occupancy excise tax and a local option 6% excise tax. The 2.75% convention center financing fee will not apply to short-term rentals until the existing Convention Center bonds are paid off in about 10 years. The bill maintains an existing exemption for owner-occupied bed & breakfast homes that rent out fewer than 4 bedrooms. The bill also establishes a local option community impact fee of up to 3% on hosts who rent out 2 or more professionally-managed short-term rental units within a municipality. Municipalities which impose this fee must dedicate no less than 35% of this revenue to affordable housing or local infrastructure. All hosts are required to register with the Department of Revenue (DOR) to collect and remit room occupancy excise tax. If a host does not rent a unit for more than 14 days in a calendar year, they may file to be exempt from collecting taxes and fees unless they exceed 14 days.

Local control is preserved, and the bill permits cities and towns to regulate the existence and location of short-term rentals. Municipalities may regulate the classes of hosts, the number of licenses or permits issued to hosts, and the number of days such accommodations may be rented in a calendar year. Municipalities may require health and safety inspections, the cost of which may be paid by the host. Hosts may be required to demonstrate that their rental units are not subject to any local code violations. Hosts may be required to obtain a local license or registration. Municipalities may establish a reasonable fee to cover costs associated with the administration and enforcement of such regulations.

The bill requires hosts and hosting platforms to maintain appropriate levels of insurance coverage. Hosts are required to notice all insurers the use the property as a short-term rental. Hosts must maintain liability insurance of not less than $1,000,000 to cover each short-term rental unit or the hosting platform must provide equal or greater coverage.

Short-term rental hosts must register with the DOR to obtain a certificate of registration and pay the room occupancy tax. In order for the occupancy tax to apply, the threshold is not more than 90 consecutive calendar days for hotels, motels, lodging houses or bed and breakfasts and not more than 31 consecutive calendar day for short-term rentals.

Short-term rental platforms must collect and remit taxes where the rental of an accommodation is conducted through a hosting platform. Hosting platforms must maintain records of taxes collected on behalf of hosts. Platforms must confirm that hosts are registered with DOR prior to permitting hosts to use the platform.

The bill requires the Executive Office of Housing and Economic Development to establish and maintain a registry of hotels, motels, bed & breakfasts and short-term rentals. To preserve confidentiality while promoting transparency, the registry will only include the street name and the city or town where the short-term rental is located, but not the street number of the property.

The following types of housing are exempt from the room occupancy excise tax: certified alcohol and drug free housing; tenancies-at-will and month to month leases; accommodations provided to seasonal employees by employers; employees of the U.S. Military on short-term accommodations while traveling on official orders; and time-share units.

The bill prohibits unlawful discrimination by a host or hosting platform. In units subject to rent control, hosts shall charge no more than the prorated maximum amount allowed.

Andrew Bettinelli, Chief of Staff, Office of Senator William N. Brownsberger

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Will Brownsberger
State Senator
2d Suffolk and Middlesex District