Info Session on New Short-Term Rental Tax Wednesday in Narragansett

Real estate agents across Rhode Island are pushing back against a proposed short-term private home rental tax in Article 11 of the Governor’s fiscal 2016 budget.

On Wednesday, members of the Rhode Island Association of Realtors and officials from the state Department of Revenue will be on hand in Narragansett to discuss the tax, which will take effect on July 1 if it is included in the final budget passed by the state General Assembly.

Under the plan, homeowners would have to collect an eight percent tax from tenants on short-term rentals of an entire house, or, a 13 percent tax on portions of the property, such as one or two rooms. Only rentals that have been paid in full prior to July 1 of 2015 would be exempt.

The tax would apply to rentals of 30 days or less.

The meeting will be held on Wednesday, June 24 from 9 to 11 a.m. in the Narragansett Town Council assembly room, 25 Fifth Ave., Narragansett.

There has been widespread opposition from real estate agents as well as residents who rely on summer rental income. Many houses in Rhode Island coastal communities can fetch rates starting at $1,000 per week and higher the closer you get to the beach. Some families have made renting their homes for a few weeks each summer a ritual to coincide with their own vacations. Others rely on the income to offset the property taxes $1 million-plus oceanfront homes incur every year.

Other complaints revolve administering the proposed tax, including a provision that would require homeowners to file monthly reports with the state even if there are no rentals that month. The rules would also be difficult to enforce and could discourage investment in the local real estate market as well as tourism amenities, opponents argue.

Small bed and breakfasts that were previously except would also be affected.

Rental agreements longer than 30 days and any seasonal rental, such as the nine-month rentals common for University of Rhode Island students in Narragansett and South Kingstown and year-round leases would be exempt.

The House passed a version of the budget that included the provision. RIAR President Bruce Lane said in a statement following the vote that it “ leave several unanswered questions regarding compliance issues with little time to address such issues before its July 1 implementation date.

“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,” he said. “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.”

According to RIAR, questions that will be answered at Wednesday’s session include:

How will the tax affect your rental properties?

Which rentals will be taxed?

Which rentals are exempt?

Who is responsible for collecting the tax?

How will the tax affect rentals that were booked months ago?

What are the penalties if you don’t comply?

Do homeowner and/or rental agents have to obtain a sales tax permit?