Cape towns seek to extend room levy to private homes

A summer rental could cost vacationers hundreds of dollars more in taxes next year if some Cape Cod towns get their way. State legislators are being asked to approve a request to impose room taxes on rentals of private homes and condos, popular havens for visiting families hoping to save on their seaside getaway.

In the next legislative session, state lawmakers will consider requests from Provincetown and Brewster seeking to expand the current 9.7 percent tax on hotel, motel, and inn room charges to include short-term rentals of three months or less. Under the proposal, approved by voters in those towns in November, homeowners would be taxed about $97 for every $1,000 charged for a rental - a cost likely to be passed on to vacationers. Seasonal workers and others who rent short-term housing on the Cape for job reasons would be exempt from the tax.

Under current law, proceeds from the room tax are split, with the state getting 5.7 percent and the remaining 4 percent going to municipalities.

According to Brewster Selectman Ed Lewis, Nantucket and about two-thirds of the 15 Cape towns that make up Barnstable County have expressed support for the expanded tax. Lewis, who has been pushing for four years to tax vacation rentals of private homes and condos, credits the economic downturn with the idea's sudden and growing popularity.

"There's an increasing need to find a way to get money for the state and for everybody involved," Lewis said. "The [bad] economy - if it wasn't for that, this would probably still be languishing."

But some worry that the expanded tax will keep vacationers away from an increasingly expensive Cape vacation, hurting an area that counts tourism as its most significant source of income.

"You come to the Cape for a week. You cook in, you go to the beach, and you know what you're paying up front for the rent," said Sandra Brierley, owner of Hopper Real Estate in Eastham and broker for 180 rentals in Eastham and Wellfleet.

"Now that you are putting this tax on, it puts them [visitors] in a shorter vacation. So now we're renting for three days instead of a week to a family," Brierley said. "It's not a good time to be doing it after a year of recession."

But some towns estimate that extending the tax to cover private residences and condos could double the amount they already get from the room tax.

Last year, room tax receipts totaled more than $22 million, according to the Cape Cod Chamber of Commerce. Although the organization does not collect statistics on how many private homes and residences are rented out to vacationers, chief executive Wendy Northcross said the chamber believes many of the 50,000 "second homes" on the Cape are used for such purposes. Between the hotels, motels, and bed-and-breakfasts, Northcross said, there are 19,000 taxable bedrooms on the Cape.

"There are more single-family homes rented on the Cape than there are hotels, motels, and bed-and-breakfasts," Northcross said. "From a competitive standpoint, when we work to fill hotels, motels, and bed-and-breakfasts, some of our biggest competition is those single-family homes."

Although the chamber has no official position on the proposal, Northcross said opponents and proponents of the expanded tax need to question how it could affect tourism.

"Will it affect business? Hard to say. Pricing is king," she said.

Meanwhile, state Representative Cleon H. Turner, a Democrat from Dennis, said he also plans to file a bill during the next legislative session seeking to include private residences and condos in the room tax. He filed a similar bill during the last legislative session, but it got held up in committee.

Now, he said, the proposal is gaining support, mainly because "this is a bill that would provide direct aid to the local economy." Details need to be ironed out on how the proposal would be enforced, but enforcement would be up to the state's Revenue Department.

In Brewster, Town Administrator Charles Sumner supports the tax expansion.

"Let's face it, it's about the money," Sumner said. The additional tax revenue would help buffer the town's finances at a time when most municipalities are facing tightened budgets and less state aid as a result of the down economy.

Howard Hayes, owner of oldCape Sotheby's International Realty, which represents over 100 property owners, said he worries that the expanded tax could hurt already cash-strapped homeowners and potential tenants.

Local governments, he added, might want to take another look at controlling their internal expenses before imposing such a burden.

"I would hope that, given the state of the economy, we don't need any new taxes [to pay]," Hayes said.

But Nick Brown, owner of Thomas D. Brown Real Estate Associates, which has offices in Truro and Provincetown, said it's only fair that those who make money renting out their homes for vacations be taxed the same as any other hotel or inn. They provide the same service, he said, and their tenants use the same town amenities as the people who stay in a hotel or bed-and-breakfast.

"Come on guys, let's all take a dose of reality here and do what should be done," he said.

Erin Ailworth can be reached at eailworth@globe.com.