RENTAL PROPERTY OWNERS BEWARE

The State of Vermont Tax Department is interested in any individual who rents their home or cottage. The State has a tax called "Rooms and Meals Tax". Since 2003 the State Tax Dept. has searched the rental websites looking for owners or rental managers and contacting them to discuss the collection and payment of the Room’s Tax. The connection of meals to rooms causes one to believe that this law may not apply if meals are not provided. But that is not so! The Room’s tax applies to all homes, cottages or rooms that are rented out on a short-term basis. The facts are clear but can be misinterpreted, so beware. Room’s tax must be collected from the renter at a rate of 9% of the rental rate. This tax is then sent to the State Tax Department monthly. There are some exceptions where the tax does not have to be collected. If you think you fall into this category, I advised you to read the web site the State has created or write to them immediately. (www.state.vt.us/tax.com). (802-828-2551) (P.O. Box 547, Montpelier, VT 05601). There are very few exceptions.

The procedure to pay the collected tax to the State is to apply for a State Tax ID number through the Tax Dept. (forms can be found on the website.) You do not need to be a business to have a tax number. You would apply under your personal name if need be. According to the State, the person receiving the rental money must have a tax number; collect the tax from the renter and forward that tax money to the State Tax Dept. When the owner of a rental unit uses a rental manager and the manager collects the rental money then that person is responsible for collecting the tax and forwarding the money to the State Tax Dept.

If the tax is not collected it will be the responsibility of the collector of the rental money to pay it anyway. The State can look back 7 years and require payment of the tax from your own pocket even if you did not collect the tax. Significant interest and penalties can be added on to the tax due.

The key is that Room’s and Meals tax is not meant for you to pay but to be collected from a renter. If you do not collect the tax you are putting yourself in a position to pay it from your pocket. There is no need to have this happen to you unless you choose not to collect it. The State does not accept the excuse that you did not know the rules. It is your responsibility to know the law.

Many of the cottage owners at the Lake have found it necessary to rent their cottage, at least some of the time, to help defray other expenses associated with owning a second home. This does not preclude one from collecting room’s tax. Don’t let the room’s tax be an added burden. Learn the law and don’t fall victim to the State Tax Department.

Submitted by Carol A. Davis

Carol Ann’s Rentals

Barton, Vermont