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Vacation Rentals Now Subject to Occupancy Tax

On December 28th, 2018 the governor signed HR 4327 into law, subjecting short term rentals to the same 5.7% state occupancy tax as hotels, bed and breakfasts, and motels.  Municipalities can also subject these rentals to a local occupancy tax (up to an additional 6%). Further, the new law requires registration with the department of revenue, and for the owner to carry liability insurance for short-term rentals.  While there is an exception on collecting and remitting the tax if the home is rented for less than 14 days in total during the year, there is no exception from registering. The insurance requirement mandates a minimum of $1M in coverage per dwelling, and a homeowner’s policy will not suffice.

The new law was reportedly intended to capture tax revenue from short term rentals, such as those made available on websites like Airbnb, and to place hotels and motels on a more even footing.  The law defines short term rentals as 31 days or less and goes into effect on 7/1/2019. Leases signed prior to 1/1/19 are exempt from these requirements.

If you would like to discuss how the new tax on short term rentals applies to your situation, please feel free to reach out to us for a consultation.

Written by Damien Falato, CPA, MST, CGMA, Tax Director

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