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Cape Cod Lawmaker Proposes Bill To Tax Vacation Rentals

BOSTON (CBS) - For many, renting a beach house on Cape Cod is the classic New England vacation. For landlocked homeowners, an ocean view can be a piece of heaven for a week or two.

Under current state law, a short term rental is not subject to the hotel/motel tax.

State Senator Dan Wolf, who represents the Cape and Islands, has co-authored a bill to allow any city or town in the state to tax short term rentals.

Wolf said the communities he represents are financially crushed providing services to so many visitors. A bill like this could help cover the need for extra police and fire personnel during the summer.

Wolf said the town of Chatham could collect as much as $1 million. Dukes County, which includes Martha's Vineyard, could yield as much as $4.5 million.

If this bill is passed, municipalities would be allowed to implement a tax on short term rentals in their communities. The state would collect 5.7% which is the current hotel room tax. The city or town could then add up to 6% more for their use.

On the streets of Falmouth, tourists say a potential surcharge of hundreds of dollars for a vacation rental could impact their plans.

Chris O'Brien of Los Angeles explained, "Any cost increase is something I would factor into my vacation costs."

Amy Iris of Maine said, "If you could go up to Maine instead and do the same sort of thing without a tax, you probably would go there."

Falmouth realtor Dennis Murphy of Weichert Realtors/Donahue Partners is concerned about the local option aspect of the tax. "If you are going to impose such a tax, you have to do it statewide."

Murphy believes the way the proposal is written could hurt the overall real estate market by impacting the decisions of people who want to buy a vacation home, and need to rent it to cover some of the expenses.

"If Falmouth was the only town to have that tax, that would really hurt our overall property values in this town because people looking to buy a vacation rental home and supplement their expenses with a couple of weeks of rentals will say, 'Falmouth is not vacation friendly, why don't I do that in a surrounding town instead?," explained Murphy.

Supporters like Wolf believe the Cape, and all of Massachusetts, is enough of a vacation magnet that a tax like this won't scare anyone away. "We need to make sure that we have sufficient revenue, so that people want to come back and visit, and enjoy the incredible places we have to offer."

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