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Massachusetts began taxing short-term rentals this week, making it one of a handful of jurisdictions that are rushing to regulate a sector that has largely run rampant since the advent of easy online booking platforms.
The new fee kicked in on Monday and applies the state’s 5.7 percent occupancy tax, which was previously imposed on hotels, to short-term rentals that are facilitated by websites such as Airbnb, Vrbo, Vacasa and others.
The tax will be levied on units that are rented out for 31 or fewer consecutive days. However, units are exempt if they are rented out for fewer than 14 days in an entire year. Hosts also don’t have to pay the tax if they collect less than $15 in rent per night.
The tax will almost certainly increase the cost of home-sharing rentals for consumers. For example, the Patriot Ledger, based in Quincy, Massachusetts, calculated that the tax would increase the cost of a two night stay in a $180-rental by $42. Staying for a week in a rental that charges $274 per night will cost consumers an additional $162 in taxes.
Massachusetts Gov. Charlie Baker signed the tax into law in January. At the time, he said that he had “long supported leveling the playing field for short-term rental operators who use their properties as de-facto hotels,” MassLive reported.
Lawmakers ultimately believe the new tax should generate $28 million in revenue for the state.
In addition to the 5.7 percent occupancy tax, local communities are free to add on their own fees.
The law Baker signed in January also requires hosts to register their short-term rentals with the state.
Airbnb told Inman in a statement Tuesday that it “has long supported and fought for regulations that would allow us to efficiently and accurately collect taxes from our hosts.”
“While we have expressed concerns regarding some provisions of this law, we continue to work on Beacon Hill to address those issues on behalf of our community,” the statement added.
Vacasa also told Inman in a statement that while the company did not work on the new tax law, it remains “committed to adhering to local tax laws and paying all taxes as required by the state.”
The Massachusetts law went into effect the same day that Los Angeles began implementing a major set of regulations on short-term rentals within its city limits. In L.A.’s case, hosts can now rent out units for a maximum of 120 days per year and have to pay a minimum $89 registration fee. Hosts are also limited to renting out space in their primary residence — a restriction that could have a major impact on people who own properties that are dedicated short-term rentals.
Numerous additional municipalities including Jersey City, Corpus Christi, Detroit and many others have also recently contemplated various forms of regulation for rentals listed on sites such as Airbnb and Vacasa. Meanwhile, a long-running battle between New York City officials and Airbnb recently prompted the company to turn over data on 17,000 listings.
The wave of interest in regulation stands in stark contrast to 2008, when Airbnb first launched and eventually carved out an entirely new niche in the market. At the time and over the ensuing years, hosts all over the world rushed to rent out everything from spare bedrooms to entire apartment buildings on Airbnb and other sites.
However, the regulation also doesn’t seem to be slowing Airbnb down; the company continues to launch new products and is reportedly preparing for a stock market debut this year.
Update: This post was updated after publication with comments from Airbnb and Vacasa.
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