The room occupancy or room excise tax in Massachusetts is 5.7 percent, but cities and towns since 1985 have had the option of placing an additional local option rooms tax of 4 percent. Last October, the local option was increased to 6 percent. Revenue generated from this local option is returned to individual cities and towns.
Of the 176 communities that currently have a local option room occupancy tax in effect, 85 in the past year have voted to increase the rate to 6 percent, or, in the case of Salem, to 5 percent, while North Attleborough has adopted the local option at 4 percent.
In other words, about half of the communities that have been collecting the local option have approved an increase in the rooms tax under the higher rate allowed since last year.
DOR's Financial Services Bureau produces a Room Occupancy Revenue Annual Report. In fact, four of these reports are available at DOR's web site. The most recent report for FY09, reflecting collections before the local option rate went to 6 percent, shows the local option generated cities and towns nearly $90 million, while the state collected $109.5 million from its 5.7 percent rooms excise tax.
The key to interpreting this report when looking at an individual city or town is to realize that the revenue numbers presented are equal to 1 percent of the room tax collected. So to estimate how much a community is receiving or might receive, take that 1 percent and multiply it by 4, or 6, as the case may be.
DOR also publishes separately a list of communities that have adopted the local option rooms tax (and when they did so) in the local options acceptance page on its web site. Scroll halfway down the list under the first bullet and you will find "room occupancy excise" link.
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