New budget’s vacation rental tax upsets landlords

PROVIDENCE, R.I. (WPRI) – One provision in the new budget that’s on track to become law would tax vacation home rentals – just in time for the summer travel season.

Late Wednesday afternoon, the Senate Finance Committee unanimously an $8.67-billion budget, which passed with flying colors in the House Tuesday. Its provisions would take effect July 1.

The budget’s proposed tax increase would fall on renters, but one local management company tells Eyewitness News that landlords are furious, calling the new provision a hassle.

“I don’t know what to do now. I was surprised and disappointed,” said Jim Durkin of Durkin Cottage Realty.

Durkin’s business, which consists of daily, weekly and monthly rentals of beach cottages in Narragansett, may take a big hit. The budget would add a tax to renters looking for cottages along Rhode Island’s coastline. Starting July 1, renters will pay a 7% sales tax in addition to a 1% local hotel tax.

Other rental businesses, like Expedia and Airbnb, would charge customers a 13% tax: 7% for sales tax, 5% for the state hotel tax, and 1% for the local hotel tax. The various tax changes will bring in an estimated $6.9 million for the state over the next 12 months, according to the House Fiscal Office.

According to Durkin, some of the landlords he works with have already said they won’t rent anymore because having to charge a tax is too much of an inconvenience.

“We will continue to lose money,” he said. “There’s no benefit here, I don’t see any benefit here at all.”

And Durkin said many of his renters are Rhode Islanders who like to escape to the coast – so the tax impacts locals just as much as people from out of state.

“I don’t think those lawmakers actually understand we’re actualy going to be taxing our own people,” Durkin added.

Governor Raimondo is defending the tax. “By closing a tax loophole, we are generating resources to invest in the state and create jobs,” her spokeswoman Marie Aberger told Eyewitness News. “Rhode Island is one of only 10 states that does not already do this.”

Durkin said he will be contacting anyone he can to try to put a stop to the tax. And because it will be implemented in just two weeks, landlords say they don’t know how to handle it on such short notice.

The budget is now headed to the full Senate, where it is expected to win easy passage.

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