With revenues falling, budget gaps widening, Proposition 2 1/2 overrides failing and local aid being cut, municipalities across the commonwealth need money. It’s also no secret that the state government is also looking for cash. That’s why proponents of expanding the room occupancy tax are optimistic the state Legislature will pass a bill allowing the taxation of short-term condominium and house rentals.
With revenues falling, budget gaps widening, Proposition 2 1/2 overrides failing and local aid being cut, municipalities across the commonwealth need money. Period.
It’s also no secret that the state government is also looking for cash. That’s why proponents of expanding the room occupancy tax are optimistic the state Legislature will pass a bill allowing the taxation of short-term condominium and house rentals.
“We’re confident, not cocky,” said Brewster selectman Ed Lewis, who since his election in 2004 has been a vocal and organized proponent of expanding the room tax.
Fourth Barnstable District state Rep. Sarah Peake and First Barnstable District Rep. Cleon Turner have pledged to co-sponsor legislation once the Legislature reconvenes in the new year to expand the tax.
The two legislators filed a similar bill last year, which never made it to the floor for a vote.
“I would think the climate would be more receptive this session,” said Turner.
Previously the idea of expanding the tax met with fierce resistance from former Senate president, Robert Travaglini, and Speaker of the House Salvatore DiMasi, who both were opposed to any new form of taxation. However, Travaligni resigned to form a lobbying firm and DiMasi’s views appear to be shifting as current revenues are declining rapidly.
“The speaker made an off-the-cuff comment in the hall recently and said ‘I think all those local option taxes are back on the table,’” said Peake, regarding a statement she heard DiMasi make to several legislators in the State House.
Currently all motel, hotel, guest house and bed and breakfast guests pay a 9.75 percent room occupancy tax, with 5.7 going to the state and 4 percent going to each town. The proposed legislation would expand the tax to include condominium and house rentals less than 90 days. The tax would be a local option and would require a town meeting vote for approval. An amendment will be filed to the bill to exempt rentals of short-term workers who would rent an apartment or other property for less than 90 days.
Resistance from the real estate and developers lobby in the State House was significant in the past, said both Peake and Turner.
“My guess is they’ll be opposing it again,” said Turner.
The argument frequently made by the lobby is that the tax would deter tourists from coming to Massachusetts, or more specifically Cape Cod, and that real estate brokers fear they would be required to collect the tax.
“The bill does not require them to do that,” said Turner, in regards to who collects the tax.
As for whether or not tourists would decide to go elsewhere, proponents say that is doubtful as most every tourist destination in the country has a room tax that includes short-term condo and home rentals. States like New York, Maine, New Hampshire and Vermont all have the tax as does North and South Carolina, Virginia, Georgia and Florida. Ski towns in Colorado and Utah have a short-term rental tax just like California and Hawaii.
The 9.7 percent tax is in several cases still less than what other vacation destinations in the Northeast have in place for condo rentals. For example, Vermont and Florida both have a 10 percent room tax for short-term rentals and Hawaii has 11.47 percent.
According to Massachusetts Dept. of Revenue figures Barnstable County generates almost $20 million in each fiscal year, with about $11 million going to the state and $8.5 million going to the 15 towns of Cape Cod. Statewide the tax generates about $157 million for the commonwealth and $88 million for those towns that have the local option motel-hotel tax. The chance to generate much-needed additional revenue for the state is very attractive in these difficult economic times, say proponents. According to Peake, a town like Chatham could receive an additional $1 million in revenue if they could tax short-term rentals.
“What’s happened is where people stay while on vacation has changed over the past years,” said Lewis.
The spending habits of tourists have shifted in favor of renting condos or houses, he said, which can be more family-friendly and a more economical option for longer stays because visitors can cook at the rental.
“You don’t see motels being built anymore,” said Lewis, as evidence of this market shift.
As such some Cape Cod towns have seen a decline in room tax revenue, especially as motels and guest houses convert to condominiums.
“We throw a party [each season], but only the property taxes pay it,” said Lewis, noting that condo renters are not paying for the services they use while on vacation.
To push for the tax, in addition to Peake and Turner filing legislation, Cape Cod towns plan to file home-rule legislation seeking state permission to impose the tax. Brewster and Provincetown voters already approved such action at special town meetings last fall. Eastham, Chatham, Yarmouth and Harwich have already placed the question on the warrant for spring town meetings and other towns are expected to follow suit.
The Legislature convenes on Wednesday, Jan. 7, and all new legislation needs to be filed by Wednesday, Jan. 14. The legislation could be acted upon within a few months or up to two years, said Peake.