Lodging industry targets corporate apartments
In what may seem like a reversal of roles, the Massachusetts Lodging Association wants to close the door on a loophole it says is costing the state and municipalities $5-$6 million a year in lost rooms excise tax. But its target isn’t hotels or inns. It’s corporate apartment rentals, which more and more companies use these days to temporarily house new hires, consultants or employees in training.
"The whole issue is to make an equal playing field," says Canter, who notes that corporate apartment providers openly advertise the fact that they aren’t subject to the rooms tax in cost comparisons on their websites. "We’ve got businesses that are good corporate citizens supporting the local community (by paying rooms tax)."
Canter says the MLA plans to meet with its extended-stay members and propose legislation in the upcoming session beginning next January to redefine lodging establishments to include the corporate apartment. While the group, which represents 420 lodging properties, did raise the issue several years ago, he says, a proposed regulation change back then stalled in the Legislature.
State Rep. Eric Turkington (D-Falmouth), chair of the Joint Committee on Tourism, Arts and Cultural Development, says he’s willing to sponsor such a bill. His committee looked into the matter last year, he says, and found that corporate apartment renters are essentially offering the same thing as extended-stay hotels and not paying their share of rooms taxes.
Currently, extended-stay hotels, which have been increasing in number in Mass. in the last several years, must charge a 9.7 percent rooms tax rate – 4 percent of which goes to communities where they are located – for stays up to 90 days. If they are in cities with convention centers – Worcester, Boston, Springfield and Cambridge – the rate goes up to 12.45 percent. The tax does not apply beyond 90 days. For fiscal 2006, the state collected more than $100 million in rooms tax revenue, not including municipalities’ take, according to Canter.
The extended-stay market isn’t exactly speaking out strongly on the matter firsthand, though Canter says he does represent them in the debate. Diane Houlihan, general manager of the brand new Residence Inn on Plantation Street in Worcester that opened up last February, says corporate apartment renters - several of which operate within a mile of her hotel – do have a competitive advantage. But , she adds, her hotel does offer somewhat different products, since it provides amenities. Since her facility is newly opened, Houlihan says, she needs to learn more about the issue. Houlihan says the company that owns the franchise including her facility declined to comment for this story.
Likewise, Jon Mehlmann, general manager of the Residence Inn by Marriott in Marlboro, which opened in July, says he hasn’t considered the tax disparity for corporate apartments. His facility, which offers studios and one and two-bedroom suites, does have customers who stay more than a month, Mehlmann says, but its market tends to be more in the two- to three-week range. Neither Marriott nor Extended Stay Hotels, to which Charles Deland, general manager of the Homestead Boston Marlborough hotel referred us, returned calls for this story by press time.
Terrance Flahive, president of Lowell-based Princeton Properties, owner of several apartment complexes in the Worcester area, including Princeton Place at 285 Plantation St. Shrewsbury, which prominently advertises its corporate units, contends the corporate apartment market is different than the extended-stay hotel niche and shouldn’t be charged rooms tax. The key distinction, he says, is the fact that Princeton requires corporate renters to sign a one-month lease while hotels cater to shorter, extended-stay customers. What’s more, Flahive says, his properties don’t provide meals or guest services.
Flahive notes that corporate rentals are only a small portion of business for his company, which owns 30 properties containing some 5,000 units throughout New England. Still, he says, corporate housing providers will be discussing how to respond to the rooms tax push.
Beyond the rooms tax, Canter says some communities in which corporate apartments are located are also losing money because such complexes are paying the lesser residential property tax rate rather than the higher commercial property tax rates where they exist. MLA can’t address that concern, he says.
John Robertson, deputy director of the Legislative Division of the Mass. Municipal Association, says his group’s members haven’t singled out the rooms tax or the property tax for corporate apartments as a concern as yet. But, he says, they do represent a common problem of tax law falling behind changes in business practices.
Besides corporate apartments, Canter and Turkington note that a debate is ongoing on the fact that people who rent out rooms and apartments in their homes to vacationers, a prevalent practice on the Cape, also don’t pay rooms tax. Turkington says the difficulty in remedying that problem is trying to figure out who would collect such taxes in a residence-by-residence situation.
Both of those areas are ways the state could get more tax money without raising rooms or meals taxes, Canter points out. And the added revenue would help MLA and other tourist groups in their argument that the state should devote more of the rooms tax toward promoting their industry, which they contend is neglected by state government despite its standing as the third-largest industry in the state.
Micky Baca can be reached at mbaca@wbjournal.com
WBJ Web Partners
Most Recent
Most Recent
0 Comments