Chafee Budget Would Add Vacation Rental Tax

While the city has only begun to look into the feasibility of such a plan, Chafee's proposal is straighforward: extend the state’s 13 percent lodging tax to vacation rentals that in most towns are extempt.

The measure, if it passes, would include B&Bs as well as private homes and condos that are rented for more than 15 days a year, up to the first 30 days of a tenant's stay.

According to Chafee's office, the tax, which could bring in up to $3 million, is needed to bridge a projected $250 million budget shortfall.

However, the proposal is not without opposition.

The Rhode Island Association of Realtors quickly came out against the extension, as has the Town of New Shoreham, which already has its own 1 percent tax on vacation rentals. 

On its website, the RIAR says, “Neither Connecticut nor Massachusetts charge hotel or sales taxes on individual homes and condominiums. If passed, this legislation would hurt R.I. property owners already crippled by the economy by putting R.I. vacation destinations at a competitive disadvantage to neighboring states.”

It continues: "Why would we want to drive away business by raising the price to stay in Rhode Island? We've already raised the cost of visiting our beaches and the public outcry was tremendous! How could property owners retroactively collect the tax from spring/summer renters who have already paid if they decide later in the year to rent their property for more than 14 days?" and "If Massachusetts couldn't figure out how to do this, how can RI?"

It's hard to imagine that Newport's plans to levy some form of tax on rental properties wouldn't be impacted by the success or failure of the Chafee proposal.

The city solicitor's office is expected to report back to the council on the plan in the coming weeks.