About Owners' Requirements - Peters Real Estate Cape Cod

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About Owners' Requirements

Owners' info > Tax info

Emailed 1 28 19 3 with 3 forms attached

Dear Summer Home Owners:

By now we know that the cottage tax law applies to all "short term rentals" of 31 days or less whether or not you are exempted from collecting tax because you rent for less than 15 days. I am still working to understand and explain the new tax law. There is a lot of confusion. For instance, we all know that certain parts of the new law were based on and give favor to cyber-hotel organizations such as AIR B&B. Our legislators can comprehend the relatively new cyber-motel model better since it is based on much the same structure as a "boards and nails" motel or hotel. Therefore you are required to a carry blanket liability insurance policy in the amount of $1 million unless you rent through an organization that carries it, such as they do. This is a bit overlapping and confusing. Some of you rent with more than one agency. Some use agenices plus a cyber-motel. Some of you take your own rentals. To use the language of our legislators, you are employing up to three "platforms" and each platform you use must be covered somehow by the insurance. If I were to purchase a blanket liability policy and you rented through me and on your own. that would be two platforms and two policies. If you rent through me and another agency and I carry the insurance but they don't, then again you'd need insurance to cover their rentals. At this time, it seems better for you to carry the insurance to cover your rentals and those you receive from real estate agencies to avoid duplication, but if it becomes more practical for agencies to do it, I will let you know.

Another requirement included with the rental law is similar in terms of duplication. I have been told that the payment of the tax will itself be confusing. There are no forms yet for submitting the tax but the law provides a hierarchy of "platforms" to explain that if one does not collect and/or submit the tax, the next level of command will be required to do so. As I understand it right now, the tax must be submitted online through MassTaxConnect. Each agency likely already has a MassTaxConnect account because of other taxes we are responsible for, but we will have to create an account number for each of you. The problem is that you will not also be able to use that account number. Any of you who do private renting will also need to open your own account and it must be done on your own computer. Some accountants may agree to handle this for you on their computers for a fee; some will not. An accountant I discussed it with will not set up such an account as the tax number assigned to you there would not be valid for use on your own computer; nor can you create an account and request an accountant to use it to file. You may want to look into this before July 1 when the collecting of the tax begins. You need to know what is expected of you and how you will handle it. I am waiting to see whether the state will find some way to consolidate this. We handle rentals for owners who also rent by thenselves, employ Air B&B or other cyber-motels, and in some cases also use another real estate agency. As it stands, those tax deposits will be posted by the state to at least three (and possibly more) different account numbers, all in your name.

Another requirement included with the rental law is that you must register with the state pretty much whether you rent or not. They want to know if you are capable of being taxed. No, they do not require you to register unless you rent, but you have to be on their books in order to rent, either by yourself or through another "platform", which means you will need to do it if you are planning to rent. You need to do it if you only rent by yourself. You need to do it even if you rent for less than 14 days a year and are exempt from collecting tax. (Remember that under certain circumstances a rental of that length has not even had to be reported on your federal income tax since before most of you were born.)

The towns will want to know if you have more than one rental unit. This is called Community Impact. It means if you have more than one property within a town that rents for short term vacations, you may be assessed an additional fee if such a fee is voted by that town at a future date. The wording is confusing in its attempt to be all-inclusive, but the impact fee applies to you if you have to either free-standing buildings, condos, or apartments and if you have and rent two or more, even if one is in a building where you also have your primary home. The suggested MAR lease says the tax may change before your tenants arrive for their vacations. This is one of the sections that has made it difficult for me to rewrite our lease. If a term of a lease is altered after it is signed, the lease becomes invalid, at least for that item. A tenant could back out of a lease with such a change. The MAR lease "solves" it by saying that with his or her signature, the tenant agrees to accept such an unknown change, That amount could be as much as $30 per $1000 of rent. The good news is that it applies to very few of you, just to those who fit the community impact mold, and I am attempting to find the right words to add it to the lease in such a way that it will be clear and acceptable to the tenant.

Another thing to keep in mind: Several of you have decided to share the burden of the tax with your tenants at least this year. The method you have chosen is to lower your rental rate so that the tenant pays the full tax, but on less rent. There is no other practical way to do it. Although it might technically be possible to contribute to the tax another way, you should only pay commission on the actual rate you charge. Doing anything other than lowering your rate will cost you money.

I am attaching three forms which you need to print, fill out and return. I am supposed to have these on file at my office to indicate that you are aware of their requirements. Rewriting the lease itself turned out to be a bit more of a project than I anticipated, but you will receive a copy soon.

Community Impact Fee

Insurance Disclosure Form

Renting 14-Days or less a year

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