Removes the exemption from the state hotel tax for residences rented in their entirety. Effective 1/1/2026.
Should S0335 be enacted, it would codify the imposition of a five percent hotel tax on all rental agreements regardless of the nature of the property. The relevant tax would apply to various types of accommodations, ultimately increasing tax revenue for the state and potentially for local municipalities. The distribution of funds collected through this tax would be overseen by the division of taxation, ensuring that municipalities receive their fair share of the collected taxes, which could bolster local funding for services.
S0335 seeks to amend existing taxation laws in Rhode Island, specifically concerning hotel taxation. The bill proposes to remove the exemption from the state hotel tax for residences that are rented in their entirety. Under the current statute, these residential rentals do not incur this tax, which has been a point of contention between local governments seeking additional revenue and property owners advocating for fewer tax burdens. By eliminating this exemption, the bill aims to create a more equitable taxation framework for all rental types, including traditional hotels and short-term rentals.
The bill has sparked debates on its impact on the local economy and property rental market. Opponents argue that the imposition of this tax may deter residents from renting their homes or adjusting rental prices to account for the new tax burden, which could lead to increased costs for renters. Meanwhile, supporters of the bill suggest that it levels the playing field amongst various types of rental properties and could provide a necessary boost to the state’s revenues, which may be particularly beneficial during economic downturns or public spending needs.