Short-term rentals offer a way for investors and homeowners to generate an income by renting out their property for a period of less than one month. Rhode Island short-term rentals can include vacation homes managed by the owner or an agency, as well as homes or parts of homes that are rented through Airbnb or a similar service. A recent policy analysis published by a real estate industry group discusses some of the regulations that apply to short-term rentals as well as issues that are relevant to all property owners and residents who may seek to rent their property as a short-term rental or are affected by other’s decision to do so.
Sales Tax Requirements for Short Term Rentals
Property owners interested in renting out a property as a short-term rental may not be aware that the Rhode Island legislature expanded the hotel sales tax requirement to include the short-term rental of residential properties in 2015. Property owners who use a rental agency or online booking system like Airbnb will not have to worry about collecting or paying the sales tax on their rental property, as the agencies are responsible for including the tax in the rent that they collect from the short-term tenants. However, property owners who independently advertise and rent out their property as a short-term rental must collect and pay the sales tax themselves. Owners who rent out an entire home as a short term rental must collect and pay a seven percent sales tax and a one percent local hotel tax on any income from the short term rental. Owners who rent out a single room or portion of a home must collect and pay the seven percent sales tax, the one percent local hotel tax, as well as a five percent state hotel tax on all proceeds from their rental.
Community Issues with Short Term Rentals in Rhode Island
The analysis acknowledges that the increase in the short-term rental market has many positive effects on local economies and property owners in recent years. However, several issues arise as a result of the increased amount of short-term rentals on the market. A primary issue within a community is the nuisance caused by an increase in short-term rental properties. Neighbors complain of loud noise, traffic issues, and increased trash, among other problems. Increased regulations and the diversion of tax revenues to address these problems may alleviate the nuisance complaints caused by short-term rentals.