‘Airbnb tax’ goes into effect, among many others in new fiscal year

THE NEW BUDGET YEAR brings with it new taxes, thanks to the budget spearheaded by House Speaker Nicholas A. Mattiello and Gov. Gina M. Raimondo. / COURTESY R.I. HOUSE OF REPRESENTATIVES, PBN FILE PHOTO/MICHAEL SALERNO
THE NEW BUDGET YEAR brings with it new taxes, thanks to the budget spearheaded by House Speaker Nicholas A. Mattiello and Gov. Gina M. Raimondo. / COURTESY R.I. HOUSE OF REPRESENTATIVES, PBN FILE PHOTO/MICHAEL SALERNO

(Updated, 3:50 p.m.)
PROVIDENCE – With each new fiscal year comes a volley of changes to the state’s tax code, and this year is no exception to that rule. One set of taxes among the one dozen changes highlighted by Acting Department of Revenue Director David M. Sullivan in particular has drawn significant attention in the hospitality sector.

The fiscal budget includes new tariffs directly affecting companies – or individuals – who provide alternative lodging for travelers. Probably the most identifiable company that falls within this category is the travel accommodation site Airbnb, which is one of the quintessential companies that people associate with the sharing community.

Traditionally, travel companies, such as Airbnb or FlipKey and others, have not paid lodging taxes in Rhode Island. But now the companies, and those who provide lodgings through them, face new taxes.

For categories being called a “short-term vacation rentals,” anyone who is renting out an entire house, beach cottage, condominium or apartment, for a period of 30 days or fewer, must register with the Division of Taxation – and pay a $10 fee annually – and charge 7 percent sales tax and 1 percent local hotel tax on all transactions for a total of 8 percent.

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But a greater tax is placed on individuals or companies renting out just individual rooms.

For what’s being called “short-term room rentals,” anyone who rents a room out for 30 days or fewer, must register for a sales permit with the division – and also pay a $10 annual fee – and charge 7 percent sales tax, a 5 percent statewide hotel tax and a 1 percent local hotel tax on all transactions for a total of 13 percent.

Prior to the new tax code, any property renting two or fewer rooms was exempt from collecting the 13 percent tax that properties with three or more rooms must collect.

All rentals lasting longer than 30 days are tax exempt, as long as a documented arrangement – such as a lease – is agreed upon between the tenant and holder of the property.

Airbnb applauded Rhode Island for the legislation, writing in a blog post on June 30, “The Governor of Rhode Island signed statewide legislation that will enable the people of the Ocean State to share their homes,” according to the post. “These smart laws facilitate collection of tax revenue and an increase in the number of guests, whose spending supports local businesses.”

All taxes collected through these transactions must be paid in full to the Division of Taxation.

The taxes went into effect on July 1 and the division is holding a seminar at the Newport Hyatt on Goat Island at 9 a.m. on July 8.

“The seminar is geared chiefly to those who rent out short-term vacation rental property, but it is also open to others who have questions and who will be affected in one way or another by the new law, including owners or operators of bed and breakfast establishments, inns, hotels and others,” according to the division.

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