New Airbnb taxes in MA

[Jane89]

What are Massachussets hosts doing about new taxes on hosts?

[John47]

@Anne226The local rate could change but as it's same as hotels currenly pay, not likely and the 3% community impact fee for multi-unit owners isn't that likely to get approved that soon either esp on Cape, I believe.
I would certaily put a "amt subject to change" as won't hurt even if it doesn't.
Tax applies to any STR bookings made on/after Jan 1 for stays on/after July 1 for any period less than 31 days. So longer stays are excluded BUT if they get shortened to 30 days or less, taxes become due which could be "interesting" as to how that gets handled!
It obviously be better if Airbnb would collect tax but i doubt they're setup to handle it yet esp as Mass DOR is still working on rules/regs/proceedures.
But if they don't do it, you need to be able to do so and document to guest that it's for that tax.
The other problem with you collecting it vs ABB is that pesky 3% CC fee and how that's handled which is a bit unknown as YOU need to be able to pass the full 12.45% to DOR even if guest has to pay 3% more on top to allow you to net the correct amt.

[Bernadette223]

Do you know how and when to ask guests to pay the tax?

[Judy154]

So, do you have any suggestions as to how we should collect these taxes? I have sent a special offer to which there have been no replies. I think because many are not charging the tax, the prospective renters are shopping for the best deal. I am in no position to cover the taxes for my prospective renters. I have heard that after they book you can go back into the reservation and request $ for taxes but legally, how does that work. I have clearly listed the 14.45% additional tax in my home description. It hasn't deterred folks from sending an inquiry but the reality and sticker shock of the special offer with the tax included scares them away.It's a dilemma.

[Carol777]

The way it works once AirBNB starts collecting tax is,  the host never even sees it.  The guest books the reservation, you are shown only how much you will collect and no reference to the tax.  The guest sees the tax and full amount on their end.   When you look at the year end info you will see how much tax was collected.  There is nothing you need to do on your end at all.   For instance, if I charge $80 a night plus a cleaning fee, all I will see is $80 + cleaning fee - ABnB fee, and total I will receive.  No tax is shown.  The guest will see the $80 + cleaning fee + tax.  

[Brenda387]

Airbnb gives hosts NO good way to charge the new Massachusetts occupany tax. If you work it into your rates, you get charged tax on inflated rate. If you send a "special offer" ncluding new tax, the guest and host get gutted, as Airbnb takes its fee on TOTAL. You are left to collect the taxes on your own from the guest, which is funky and a total hassle. I hope Airbnb addresses this SOON.

[John47]

Given that it only applies to STR's after July 1, it's not an issue unless you're booking for past that and then I agree it's a BIG problem due to the rules on separate disclosure, etc. -
And as I see it, the guest will have to pay the tax on the booking fee and service fee as well, so not sure how that can work, since law says tax applies to fees.

[Ken-and-Kathleen0]

The law also applies to things like cleaning fees which is totally ridiculous.

Since AirBnB was one of the proponents of this tax they need to have a system in place quickly as my guess is the bulk of AirBnB in Massachusetts revolves around summer rentals. Most of those are booked before the end of February (especially on the the Cape and Islands).

[John47]

@Ken-and-Kathleen0

The reason that it applies to cleaning fees, as i understood it, was that if they didn't, someone could say: rent is $100, Cleaning fee is $1000 just like people on eBay would charge $1 for item and $15 shipping to avoid ebay fees.
The issue I have is that DOR site current says it applies to other service charges, which includes the 3%  credit card fee, which becomes a neverending cycle if you tried to implement that.
I just spoke to Jennifer in DOR about this and she's going to research it.

[Katrin115]

What does DOR stand for? 

[Katrin115]

Nevermind: Department of Revenue?

[Alicia242]

@John47 Exactly! Which isnt fair to our guests.... Why are they paying a tax on a service fee and booking fee?

[John47]

@Alicia242 

I've since rethought my approach to this issue, at least as it relates to service fee. And the service fee is not really being charged by Airbnb, but passed through to us from credit card processor.

However, it still has the potential to be negative to a host in terms of income though by a small amount.

Let me show via an example as I BELIEVE it would work, and using a booking fee of 12% which may or may not be accurate but close enough.
Using a base rent of $1200 and a cleaning fee of $50, the basis for booking fee is $1250. So at 12%, that would be a $150 fee.
Thus the guest would be charged $1250+$150 or $1400 without the new tax. Since hosts get 97% of that after 3% service fee,
in this case, that would net $1358 to host, right? As $1400 x 3% = $42 taken off the guests payment.

The problem that i see is that when taxes are added, Airbnb MUST remit the computed amount of tax, not the net 97% that they get from VISA/MC.
So - we take the $1400 and add what my town rate would be (5.7% MA + 4% local + 2.75% Cape wastewater) or 12.45%.
That's $174.30 in tax so now guest must pay $1574.30. However, Airbnb will get charged 3% on that or $47.23 by credit card companies.
Thus they will end up with $1527.07 to work with. And they HAVE to give the $174.30 to MA DOR which means that there's now only $1352.77 left to pass onto us as a host!

Comparing the payout to host without tax of $1358 to the post tax amt of $1352.77, the host gets $5.23 LESS than before, it would seem!
The guest is therefore paying the tax on the credit card fee, and the booking fee but we as host, get a bit less income!
I really don't see any other way that it could work due to how the process and laws work.
And it would be probably impossible to raise rate just enough to net similar amount to before as unable to charge less than $1 increments,
plus it would look weird to instead of a daily rate of $120 (for 10 days in example above), have a daily rate of maybe $120.55, right?

The above is just my current view on how I suspect the taxing in MA might work and not anything official, ok?
(Composed in WordPad and pasted so looks a bit odd due to formatting difference - sorry)

[Alicia242]

I see what your saying ....

I list just a private room and bath in my town house but no matter how small the $ we make as hosts. I cant lower my rates any as it wouldn't be worth my while to list my home...

You make many valid points.

It appears you rent weekly John.... The money in weekly summer rental on the cape it great in the desirable

towns especially like Chatham. My mom who loves in Truro is so glad she sold here rental in Wellflleet in the fall of 2017. Which was a great investment for her.

Anyways, I appreciate the response, info & thought process.  

[John47]

@Alicia242 
just to be clear: That example was NOT using MY rental rates (Mine are cheaper!) but just some typical amts that might occur in MA/Cape though i used my town tax as sample of common tax rates for Cape.
Originally i was thinking about just how MA would tax the 3% added on fee but realized that by taxing the total amt, they effectively did so as the 3% is removed by Airbnb.  What caused me to think the other was another prior discussion elsewhere about how to pass the 3% that Square charges to consumer by adding 3+% to charge.

[Judy154]

My home is in Hyannis and I have had several inquiries for the summer in which I made a "special offer" to include the tax and never heard from the folks again. What makes this frustrating is that most listings don't even mention the new tax and I feel that human nature will have prospective renters look for those not listing the additional tax. If Airbnb took care of collecting the tax, everyone would be on the same playing field.I nam in no position to cover those taxes. 14.45% adds quite a bit to a weeks vacation.