17 Oct Avantisteam Decides The Vineyard Gazette – Martha’s Vineyard News
Early returns are in for the Island’s first short-term rental tax, and while they show a marked increase over past quarters, they haven’t quite matched up with lofty predictions — leaving town officials still wary about speculating on the true impact of the tax.
Edgartown saw the largest boost, about $137,000, for the first effective quarter of the new tax (June 30 to Sept. 30). For that quarter, returns rose 30 per cent from $455,000 in 2018 to $592,000 in 2019.
In Tisbury, the addition of the short-term rental tax to the existing rooms occupancy tax increased rooms tax revenue for the summer quarter by about 11 per cent, $141,000 to $157,000.
Oak Bluffs town administrator Bob Whritenour said the town had not yet received returns from the summer quarter.
Up-Island, Chilmark saw a 45 per cent increase in its summer quarter returns, with revenue increasing from $39,000 in 2018 to $56,000 in 2019.
West Tisbury, which did not have a rooms excise tax before this year, brought in $33,000 from the tax on hotels and short-term rentals.
Numbers from Aquinnah were not immediately available.
But town accountants and financial administrators around the Island said the numbers tell only part of the story. There is a lag in how the tax is collected, meaning that for most towns the 2019 summer quarter only includes tax revenue from May 1 through July 31, 2019. And because the short-term rental tax took effect on July 1, the first returns most likely show the effects of just one month — this past July — of new tax collection.
Edgartown town administrator James Hagerty said the intricacies of the tax and its lag-time collection methods leave him cautious about using the returns as a basis for any sort of financial projections.
“There are so many variables,” Mr. Hagerty said. “I don’t know the exact reporting lag time. I don’t know when exactly hotels and rentals report the tax and can’t differentiate between them because the returns come back as one lump sum . . . There’s not enough history behind it to really forecast.”
“All I can say is that from what I have, there was a 30 per cent increase in the supposed busiest time of the year. But that thirty per cent increase isn’t going to allow me to predict a 30 per cent increase every quarter, like people claimed.”
Signed into law last December, the short-term rental tax allows towns to levy an excise on any rental of 14 days or less. The new tax took effect July 1 but applied to all short-term rentals booked after Jan. 1. Although it was aimed at regulating the rapidly expanding AirBnB market in and around Boston, the tax had a direct impact on the seasonal tourist economies on the Cape and Islands, where short-term rentals have long been a lodging option for travelers and a source of income for homeowners.
Because five of the six Vineyard towns — Edgartown, Oak Bluffs, Tisbury, Chilmark and Aquinnah — already had a hotel and rooms excise tax, the new tax was an add-on. Oak Bluffs and Tisbury decided to tax short-term rentals at six per cent, while Edgartown, Chilmark and Aquinnah decided to tax them at four per cent. West Tisbury, which did not have a hotel and rooms tax, voted to add a six per cent local option to the mandatory 5.5 per cent state tax.
The new law spurred a grassroots movement to use a portion of the funds from the tax for the creation of an Islandwide housing bank. The proposal was defeated at town meetings after it saw considerable pushback from local officials amid so many unknowns about the new tax.
Over the winter, the Martha’s Vineyard Commission released revenue projections based upon the estimated number of seasonal homes on the Island, estimating the additional tax revenue from short-term rentals at approximately $7 million annually Islandwide. Now Islanders have their first actual window into what the tax could portend for towns.
Based on numbers gathered from the most recent financial reporting quarter, the tax will generate substantial revenue but far short of the commission’s projection. For example, while the MVC estimated that Edgartown alone would bring in $2 million in additional revenue annually, the $137,000 increase this July doesn’t suggest the town will reach that number, Mr. Hagerty said.
“Using what I have right now, it’s not achievable,” Mr. Hagerty said, speaking of the MVC projections. “That doesn’t mean it’s not going to be achievable in the next year or two once the process is more well defined and well regulated.”
He said Edgartown has relied on revenue from the hotel and rooms excise tax — which has come in just short of $1 million for the past few years — to balance its budget. He said all the revenue generated from the short-term rental tax is collected by the state and then returned to the towns. Because town budgeting took place before the tax took effect, the extra money from this year’s tax will go to free cash, Mr. Hagerty said. Tisbury town accountant Jon Snyder was similarly cautious about using
the recent data to extrapolate for annual revenue predictions. Although the commission predicted Tisbury would generate an additional $1.3 million in yearly tax revenue, July returns only provided approximately $16,000. Mr. Snyder said a number of factors could be at play, including the closure of two bed and breakfasts in town, making the numbers difficult to interpret.
“We only have a sliver of the data,” he said.
West Tisbury town accountant Bruce Stone, who has worked closely with the state Department of Revenue since the tax took effect, offered further interpretation for the July numbers. He noted that June 30 was a Sunday, meaning that any rental beginning that day or earlier would not be included in the tax. Others noted that the tax didn’t include any rental booked before Jan. 1, meaning that many who booked early for their July rental were exempt from the tax.
“This makes it very difficult to make accurate projections on what annual collections actually will be,” Mr. Stone said in an email.
The fall quarter often sees larger hotel and rooms tax returns, because it includes August, September and October. Financial reports from years past show that Edgartown took in 15 per cent more revenue in fall 2018 than in summer. In Tisbury the number was about three per cent more.
Chilmark town accountant Ellen Biskis said her summer quarter numbers included rentals through August 19. The $56,000 in receipts from that period already surpassed the entire hotel and rooms tax totals from the 2017, 2018 and 2019 fiscal years, but Chilmark could still fall short of the commission’s predicted $748,000 revenue increase.
In short, Mr. Stone said, it’s still too early to evaluate the numbers.
“We will have a far better idea of the total impact when we receive the state payment on Dec. 31, which would reflect room rental taxes collected for August through…