REALTOR Association Responds to House Passage of Tax on Short Term Private Home Rentals
RISBJ Staff | Jun 19, 2015
WARWICK, RI –The Rhode Island Association of Realtors (RIAR) today issued the following statement from President Bruce Lane regarding the proposed tax on short term private home rentals:
“The vote to approve a tax on short term, private home rentals taken by the House on Tuesday of this week, and subsequently supported by the Senate Finance Committee on Wednesday, leave several unanswered questions regarding compliance issues with little time to address such issues before its July 1 implementation date. If the rental tax passes with full Senate approval on June 23rd, there will be insufficient time for communication to tenants, homeowners, rental agents and room resellers prior to the time they are subject to fines and penalties for non-compliance.
“The proposal calls for an eight percent tax on short term private home rentals on rent collected July 1 or later. If part of a home is rented – one or two rooms for example – the rental is subject to a 13 percent tax. As a tourist destination, Rhode Island has hundreds of homes under contract for summer rental, which are not yet paid in full. It is not feasible to expect that the State, which has done no outreach thus far, can communicate the mandates of the tax to tenants who have already signed contracts for a specific amount, or for homeowners and rental agents to subsequently collect the tax before the July 1 deadline. While tenants must pay the tax, homeowners must collect it or be subject to fines of up to $5000 per day or up to one year imprisonment.
“Unfortunately, our representatives have ignored these concerns and moved to support what appears to be an implausible goal. It is left to the Senate to understand the unrealistic expectations in Article 11 of the budget and vote to stop its July 1, 2015 implementation date.”
“Questions that remain regarding this tax are:
- Which rentals are subject to the 1% local tax, 5% state hotel tax, and 7% sales tax?
- Who is legally responsible for collecting the taxes – the owner or rental agent?
- Must both the owner and rental agent register with the Department of Revenue (DOR)?
- How often must an owner or rental agent transmit the tax to the state?
- How often must a homeowner file tax returns for the sales tax and local hotel tax?
- Must taxes be transmitted electronically?
- What are the penalties for failure to comply and to whom would they be imposed?
- What is exempt: rental agreements that were signed by July 1st, 2015 (as stated on the House floor during discussion of Article 11 on Tuesday) or contracts that were paid in full by July 1st??
- How much revenue does the state expect to generate from expanding these taxes to private home rentals?
- Why did the administration decide to implement the tax in the middle of the summer rental season instead of postponing it?
- Is the homeowner responsible for paying the tax if a tenant with a signed lease refuses to pay the “surprise” 8% tax that was not part of the lease or agreed-upon rent?
- How will DOR distinguish between a real estate brokerage and a reseller?
- How will DOR distinguish between a real estate brokerage and a hosting platform?
- Do the taxes apply to the gross rental or the net rental (gross minus commission in transactions involving a rental agent?)
- What is the cutoff date for a short term rental – 30 days or more, or 30 days or less? The language in the bill is contradictory.
- How will DOR enforce this tax against homeowners who post For Rent By Owner signs or advertise on Craigslist, airbnb, etc.?
- How will DOR prevent home rentals from being conducted under the table to avoid the taxes?
- How will DOR notify homeowners who are not residents of Rhode Island and who do not list their property with rental agents of these taxes?
- Are month-to-month year-round tenancies, (typical in Providence), 9-month rentals (common in college areas), and rental units with a one-year or more lease are exempt from all three taxes?
- Rental agents and homeowners collect security deposits in addition to rental payments. The security deposits are returned after damages and cleaning costs are deducted. Are these security deposits subject to the tax?
- How will rental agents and homeowners document which deposits are security deposits versus rental deposits, particularly, if the company accepts credit cards for payment?
- Has the State anticipated the loss of revenues to other areas of the economy – shops, restaurants, etc. – as a result of this tax?”
Leave a comment
