As covered in our recent blog, “Rhode Island Tax Now Applies to Short Term Residential Rentals,” there is a new tax Rhode Islanders will want to keep an eye on. You will want to be aware of conditions and requirements under the new ruling to clear up any confusion on the new tax.

5 Questions about the New Tax

Q. Will cleaning fees be subject to the tax?
A. Yes, if collected in relation to the rental agreement. They would not be subject to tax if the occupant directly engages a cleaner.

Q. A traditional housing arrangement, where no current written lease exists, appears to be outside the specific exclusion listed in the language of the law, does this mean that a long term tenant should be taxed?
A. Documentation is required to support rental arrangements that are greater than 30 days or at least a calendar month. Leases are recommended as the best documentation.

Q. When is the tax paid for seasonal renters/filers if, for example, a deposit is collected in February, the balance is collected in June, and actual occupancy is in July?
A. Ordinarily, the tax would be paid in the month after the keys are given to the occupant, but in this example, the tax should be paid as a June sale since final payment was received in June.

Q. In the case of a typical college rental, what months would sales & hotel tax filings be required?
A. Since the September to May lease is exempt, only the seasonal rental months would require tax filings. On the business application, “seasonal rental” would be checked, and only June through August would be listed as rental months.

Q. If a three bedroom house is being rented, should it be listed on the application as “3 units”?
A. No. If a three bedroom house is being rented to an occupant in its entirety, then it should be listed on the application as “1 unit.”

Remember, these new rules apply to rental periods beginning on or after July 1, 2015, so it is important to understand your new short term residential rental tax obligation and how it will fit in to your current finances.

Questions? Contact any member of our Hospitality Services Group.