Here is the latest guidance from the Department of Revenue about your responsibilities related to short-term rentals under the new law. REALTORS® who help arrange a short-term rental and collect rent meet the definition of “intermediary” under the new law.
The Department of Revenue wants to be sure that Intermediaries understand what’s required of them as a result of the new Massachusetts legislation that expanded room occupancy excise. As of July 1, 2019, Intermediaries are expected to collect and remit taxes on short-term rentals and traditional lodgings.
An Intermediary is anyone besides an Operator who helps to arrange a property rental with any Operator and who also collects the rent. An Intermediary can arrange a property rental and collect rent for any Operator whether they operate a bed and breakfast establishment, hotel, lodging house, short-term rental, or motel. An Intermediary might include a broker, travel agent, hosting platform, or Operator’s agent. An Operator’s agent is anyone who manages a property for rent or books reservations of a property for rent. An Operator’s agent includes a property manager, property management company, or real estate agent.
IMPORTANT GUIDELINES
If you collect the rent, you must collect and remit to DOR all appropriate taxes, fees, and excise associated with the rental to avoid risks of non-compliance:
- If the Intermediary collects the rent and fails to collect and remit to DOR the applicable taxes, fees, and excise associated with the rent, the Intermediary is liable for such amounts.
- If the Intermediary collects the rent, s/he is not allowed to shift responsibility for collecting the taxes, fees, and excise associated with the rent to the Operator.
- An Intermediary cannot request that an Operator remit taxes that are required to be collected and remitted by the Intermediary.
- Not being fully informed about the law, or not updating systems to accommodate the law on a timely basis, are not excuses that will avoid liability for any applicable taxes, fees, and excise.
- Taxes and fees can include local option excise, Cape Cod & Islands Water Protection Fund fee, convention center financing fee, and/or community impact fee as well as the Massachusetts room occupancy excise.
Responsibility for overpayments or collections in error:
- If an Intermediary collects taxes, fees, or excise in excess of what’s required, it’s the responsibility of the Intermediary to refund the overpayment. This would ideally occur before filing with DOR.
- If an overpayment is discovered after filing with DOR, the Intermediary would refund the customer and file an amended return.
- Any taxes, fees, or excise collected from a customer who’s exempt, such as a qualifying bed and breakfast home, should be refunded by the Intermediary.
- If both the Intermediary and Operator report the same rent collected by an Intermediary, the Operator would file an amended return to adjust the rent amount to exclude what was reported by the Intermediary, and the Operator would be refunded the amount paid.
Responsibilities of an Intermediary when working with property Operators:
- It is the responsibility of the Intermediary to gather all the necessary property information from an Operator to know what taxes, fees, and excise must be charged in addition to rent – or to be assured that the property meets the criteria for exemption.
- The Intermediary must collect a certificate number from Operators for each property. The certificate number is provided once the Operator registers with DOR through MassTaxConnect. Special provision: Until November 1, 2019, if an Operator does not yet have a certificate number the Intermediary may use the Operator’s Federal ID number or Social Security number.
- If an Operator claims their property rental is exempt from taxes and fees – generally because they are renting the property for not more than 14 days annually, it is a timeshare, or they satisfy the exemption requirements for some B&Bs – the Intermediary will not charge taxes, fees or excise. However, if the property that was claimed to be exempt because it would not be rented for more than 14 days is rented through the Intermediary for more than 14 days, it’s the Intermediary’s responsibility to begin collecting taxes, fees, and excise on the 15th day and beyond. The Operator is responsible for paying the tax for the previous 14 days. Similarly, if an Operator claiming to be an exempt B&B home does not meet the requirements for that exemption, it would be the responsibility of the Operator to pay the appropriate taxes, whether or not they were collected from the occupant.
INFORMATION RESOURCES
How to Videos – You’ll learn how to register as an Intermediary and how to file a return and pay taxes for one property or multiple properties.
FAQs on room occupancy excise – You’ll learn the definitions of terms, what’s required of you as an Intermediary and you’ll find legal guidance.
For more information on MassTaxConnect – See the Frequently Asked Questions or the comprehensive list of video tutorials at the top of the homepage.
This is the latest in a series of communications directed at intermediaries. For previous communications, please see An Intermediary’s role in new room occupancy legislation and You are an Intermediary. Here’s how to comply under the expanded room occupancy excise legislation.
Additional questions can be directed to the MAR legal hotline – 800-370-5342