Report Weighs Benefits Of Applying Hotel Tax To Airbnb Rentals

July 22, 2016

A report issued today by the nonprofit Massachusetts Budget and Policy Center (better known as MassBudget) could bolster the case for changing the state’s tax on hotels to include Airbnb rentals.

Hotels, motels, and boarding houses all have to pay a special “room occupancy tax”—about 6 percent to the Commonwealth, and up to 6 percent more in local taxes that cities and towns can impose.

People using Airbnb to rent out rooms don’t have to pay that tax, thanks to an exemption meant to protect small businesses. But a growing number of reports in Massachusetts and elsewhere have suggested that many Airbnb operators are running businesses that look more like hotels than mom and pop bread and breakfasts.

The state Senate is now considering changing those laws as part of a larger economic development bill before the legislature.

Citing figures from the state's Department of Revenue, the MassBudget report notes that the  amount of revenue being lost by not taxing these establishments is estimated to be about $16 million to the Commonwealth and another $16 million or so for cities and towns, which may opt to impose additional occupancy tax themselves.

The report also looked at practices in other states.

"There are now eleven other states that impose this tax," noted MassBudget President Noah Berger, "and there’s no evidence that we were able to find of adverse effects of doing that."

The proposal currently before the Senate would tax AirBNB and other home rentals at about half the rate of hotels, and allow cities and towns to impose an additional tax up to about 6 percent.


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