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  • Writer's pictureChuck Luce

What are Cape Cod Short-Term Rental Taxes?

Short-term rentals have become increasingly popular in Massachusetts, especially on Cape Cod. However, with the rise of platforms like Airbnb and Vrbo, the taxation landscape for these rentals has become more complex. Understanding the tax obligations associated with short-term rentals is crucial for both hosts and guests alike.


In Massachusetts, short-term rental operators are subject to several taxes and fees, including the state's Room Occupancy Excise Tax, town and the Cape Cod and Islands Water Protection Fund Fee. Let's break down what these taxes entail and how they impact both hosts and guests.


1. Room Occupancy Excise Tax (MA and Town): The Room Occupancy Excise Tax applies to all short-term rentals in Massachusetts, including those in Cape Cod. Hosts are required to collect and remit this tax to the state. As of 2022, the tax rate is 5.7% for most cities and towns in Massachusetts, but it may vary slightly depending on local regulations. This tax is calculated based on the total rental amount charged to the guest, including any cleaning fees or other additional charges.


This link should make it easy to find the Room Occupancy Excise Tax in your town: https://dlsgateway.dor.state.ma.us/reports/rdPage.aspx?rdReport=LocalOptions.Room_Tax_Impact_Fee


2. Cape Cod and Islands Water Protection Fund Fee: In addition to the Room Occupancy Excise Tax, short-term rental operators in Barnstable County (which includes Cape Cod) are also subject to the Cape Cod and Islands Water Protection Fund Fee. This fee is used to support wastewater management and environmental protection efforts in the region. As of 2022, the fee is 2.75% of the total rental amount charged to the guest.


Compliance and Reporting: To comply with tax regulations, short-term rental hosts in Massachusetts, including Cape Cod, must register with the state's Department of Revenue (DOR) and obtain a Certificate of Registration. Hosts are responsible for collecting the applicable taxes from guests and remitting them to the DOR on a regular basis. Failure to comply with tax obligations may result in penalties and fines.


Implications for Guests: Guests booking short-term rentals in Massachusetts should be aware that the rental rate advertised may not include taxes and fees. It's essential to review the total cost breakdown before making a reservation to avoid any surprises. Additionally, guests should ensure that the rental property is properly registered with the state to avoid potential legal issues.


Conclusion: Navigating short-term rental taxes in Massachusetts, particularly in Cape Cod, requires careful attention to detail and compliance with state and local regulations. Hosts and guests alike should familiarize themselves with the applicable taxes and fees to ensure a smooth rental experience. By understanding their tax obligations, hosts can operate their rental properties legally and responsibly, while guests can budget accordingly and enjoy their stay without any unexpected financial burdens.


How does ProHost handle these taxes: When a guest books your home via our Airbnb account, Airbnb collects and remits these taxes on your/our behalf. All other bookings require ProHost to collect this tax payment from the guest. We then submit this on your behalf via MassTaxConnect (under your home's occupancy certificate number).



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