A new state tax on short-term rentals kicked in earlier this week that will affect local homeowners who have turned their properties into Airbnbs, as well as the people who stay in them.
The law extends state and local room occupancy taxes like those levied on hotel stays to rooms, apartments or homes rented on a short-term basis — 31 or fewer consecutive days. Places rented 14 or fewer days a year are exempt.
Seven towns and Greenfield, the only city in the county, have already voted a room occupancy tax of 6 percent, with the exception of Charlemont, which voted a 4 percent tax. The remaining 18 towns would have to approve a room occupancy tax at their Town Meetings this year or next, according to the Franklin Regional Council of Governments. That would allow them to collect a portion of the tax from the state each quarter.
The state says the tax will likely affect consumer prices, though it is not required to be collected if the total charged is less than $15 per day.
For example, a one-room condominium that costs $155 a night plus cleaning and service fees would carry a tax of about $55 for a two-night stay. A week at a two-bedroom cottage on Nantucket that is listed at $547 a night plus fees, for instance, would carry a tax of $398, according to the state Department of Revenue (DOR).
The first payment for short-term rental tax will be due Aug. 20, and after that, returns will be due on the 20th of each month, according to the DOR. Short-term rentals must now register with the DOR.
Both the House and Senate expect roughly $28 million more in revenue to the state each year because of the new tax.
The short-term rentals law is going to require some changes at the DOR, which is considering repealing two sections of regulations and replacing them with one newly written section.
When Gov. Charlie Baker signed the short-term rental bill into law in December, he said he has “long supported leveling the playing field for short-term rental operators who use their properties as de facto hotels.”
Earlier this year, town and city officials met with FRCOG representatives to consider adopting new bylaws and ordinances to regulate internet-enabled Airbnbs and other types of short-term rentals in their towns.
With many Airbnbs popping up around the county to accommodate transient guests, town officials said they are realizing they need to make decisions about creating zoning laws to regulate them at the local level.
There are plenty of Airbnbs throughout Franklin County and just beyond its borders. A visit to airbnb.com reveals just that — 300 listings appear in Franklin County and just over the border in southern Vermont — and that people are renting entire houses, apartments, rooms, yurts and even a garden shed in a backyard in the Shelburne Falls area and a library room in an urban cottage in Montague. Full names are not listed on the website — sometimes a first name is listed. Therefore, owners could not be reached for comment.
Regulating short-term rentals by creating bylaws or ordinances requires a two-thirds vote at Town Meeting, or in Greenfield’s case, a two-thirds vote of the City Council, according to FRCOG Director of Community Services Phoebe Walker.
Communities can establish bylaws to regulate things like licensing, parking, penalties for violations and within which zones Airbnbs can operate, and each city or town will be responsible for enforcement of any new law it passes, Walker said.
The state definition of a short-term rental is an “owner-occupied, tenant-occupied or non-owner occupied property including, but not limited to, an apartment, house, cottage, condominium or a furnished accommodation that is not a hotel, motel, lodging house or bed and breakfast establishment, where: (1) at least one room or unit is rented to an occupant or sub-occupant; and (2) all accommodations are reserved in advance.”
The operator of a short-term rental can be the owner, lessee, sublessee or holder of the mortgage on the property; that person does not have to be a resident of Massachusetts.
The state is also requiring homeowners to carry insurance on their short-term rental properties.
Tim Farrell, co-owner of Gilmore and Farrell Insurance on Bernardston Road in Greenfield, said in the spring that homeowners who decide to run an Airbnb should check with their insurance company about coverage. He said all of the companies his firm works with do not cover Airbnbs under a standard homeowners policy.
“The companies are all addressing this,” Farrell said. “If something happens, there’s no coverage or protection for the homeowner.”
Farrell said he believes people who run Airbnbs will have to acquire a commercial policy, just like bed and breakfasts have had to do for years. He said just like any other business, it won’t be that costly if rooms are being rented a good portion of the year, but if a homeowner is only renting to someone on occasion, it could become cost prohibitive.
Reach Anita Fritz at 413-772-0261, ext. 269 or afritz@recorder.com.