PROVINCETOWN — Even during the pandemic, the short-term rental tax is bringing in serious money to the four Outer Cape towns.
The long-awaited tax — technically, an expansion of the existing rooms occupancy tax to include short-term rentals, such as those sold online on Airbnb and Homeaway — went into effect on July 1, 2019. In the year since, revenue has gone up by $1.7 million in Provincetown, and by about $700,000 in Truro, in Wellfleet, and in Eastham.
Taxing short-term rentals has long been seen as a way to raise money for affordable housing, wastewater treatment, infrastructure, and other projects, but how much money would be realized was never certain. And, of course, the coronavirus pandemic puts an asterisk on this year’s results, though it seems likely that future years will run better rather than worse.
The start date of the expanded tax — July 1, 2019 — falls in the middle of a fiscal quarter (Q1 of Fiscal Year 2020), as defined by the state Dept. of Revenue (DOR). To make clear comparisons of before-and-after revenue, the Independent did not rely on that mixed quarter and, instead, compared the four quarters prior to Q1, when there was no short-term rental tax, to the four quarters following Q1, when there were. Q1 was not included in either tally.
In Provincetown, the rooms tax was bringing in $2.2 million a year before the short-term rental expansion, based on the town’s many hotels, guest houses, and campgrounds. Short-term rentals brought the total in the year after to $3.9 million.
In Truro, traditional lodgings brought in $370,000 the year before the tax was expanded. The year after, with short-term rentals, the tax generated $979,000.
In Eastham, the rooms tax brought in $293,000 before the expansion, $1.1 million after.
In Wellfleet, which has few hotels, the rooms tax generated only $116,000 the year before it was expanded. With short-term rentals included the year after, the tax generated $837,000.
Compliance with the tax appears to be strong. The DOR maintains a public registry of properties that pay rooms tax. In Provincetown, there are 997 tax-paying short-term rental properties. Independently, the market-research website AirDNA shows 1,007 “entire homes” being offered for rent in Provincetown at the most recent peak, in August 2019. Truro, Wellfleet, and Eastham actually have more properties registered with the DOR than are shown in AirDNA’s database.
The four quarters that followed the introduction of the short-term rental tax roughly correspond to rental activity between August 2019 and July 2020, according to Provincetown’s tourism director, Tony Fucillo. Fiscal quarters of tax revenue don’t map perfectly onto the calendar, because some businesses remit taxes monthly instead of daily or weekly. The DOR has reported some data inconsistencies of its own this year, which means the four quarters may represent slightly more than 52 weeks. And any one year is an imperfect predictor of the year to follow.
What’s more, the year between August 2019 to July 2020 includes the two months in which hotels were closed due to Covid lockdowns, and the two months following, in which demand was battered by travel restrictions. However long the pandemic continues, these revenue numbers would have at least as much room to go up as they have to go down.
Nonetheless, towns seem to be holding back when it comes to allocating the new money.
“For the last several years, we have been waiting for the short-term rental tax and the recreational marijuana tax to kick in and provide us a new source of revenue to meet our needs,” states the Provincetown town manager’s budget message, presented to the select board earlier this month. “As these new revenue sources can still not be predicted with precision [due to the Covid pandemic], our budgeting approach has been pragmatic, pausing in this unusual year so we can be both well informed and thoughtful before taking any substantial action or making a significant policy commitment.”
For those who were hoping for a just such a “commitment,” the “pausing” means another year of waiting.
