Important: NJ Sales & Hotel Tax

What does it mean?

Not much has been made of the legislation passed in NJ back in July in order to reach a budget agreement. There are taxes on Uber, taxes on liquid nicotine, and taxes on AirBnB. There has been an ongoing push from the Hotel lobby for years to tax “AirBnB” and they finally got their wish. Legislators who sponsored this bill pronounced that they were finally “leveling the playing field for hotels” but they wanted to retain New Jersey’s tourism appeal compared to surrounding states who already charge Hotel & Sales tax. So they gave us the “Shore Rental exemption. That meant “no taxes on rentals at the Jersey Shore” right?

Wrong.

NJ legislators and reporters covering the story are simply trumpeting misleading, or downright incorrect information. If you read the actual wording of the law, there is no “Jersey Shore” exemption to the modified Hotel and Sales Tax legislation. In short, the new law changes the wording of previous Hotel tax legislation to now include the term ‘transient accommodations’. Basically, short term rentals – like weekly rentals at the Jersey Shore. Previously, any accommodations that did NOT provide hotel-like services (maid service, linen service, etc) were exempt from these taxes. No more. ALL rentals (for less than 90 days) are now required to collect a total of 11.625% taxes.  There is no “Jersey Shore” exemption. Instead, there is an exemption that specifically excludes any rental…

“where the keys to the furnished or unfurnished private residential property, whether a physical key, access to a keyless locking mechanism, or other means of physical ingress to the furnished or unfurnished private residential property, are provided to the lessee at the location of an offsite real estate broker licensed by the New Jersey Real Estate Commission pursuant to R.S.45:15-1″

Basically, any rental where the renter has to go to a NJ Real Estate office to pick up the keys, is now exempt. This was lobbied for by the NJ Association of Realtors in the hopes of regaining all the business they have lost since the development of sites like VRBO which improved and streamlined the rental process. As a result, I am sure some owners will likely return to using local Realtors rather than deal with collecting and remitting the taxes. With that, they will also likely raise their rates to cover the 10-12% commission they end up paying to those same Realtors. Ultimately, it will still cost vacationers about the same 12% as the taxes would.

AirBnB and VRBO on the other hand are now required by law to charge, collect, and remit the tax directly to the state. That means on EVERY booking handled through those marketplaces, the 11.625% tax will be added to the rental. This is probably the end of AirBnB & VRBO rentals at the shore as I can’t imagine many travelers paying their outrageous booking fees AND the tax which together can exceed 20%. Instead, alternative arrangements will likely come about that allow owners to arrange rentals directly as they have for years (repeat renters, ads on Facebook, VRLBI or ShoreSummerRentals, etc), yet work with local Realtors to provide “key exchanges” to stay within the letter of the law. Unfortunately for renters these days, that simply means adding an inconvenient stop at a Real Estate office to pick up “key codes” for digital locks. Something that could easily be emailed or texted….but unfortunately according to the State Treasurer’s office….that does not meet the letter of the law. The keys or codes must be exchanged on location at the Real Estate office.

“The statute therefore requires that the buyer actually go to the broker’s location to get the physical key (or access code) in order to qualify for the exception.”

There are ongoing efforts to get this law amended in the hopes of creating a REAL “shore rental” exemption, and you can help. If you are a NJ resident, I would encourage you to call your local representatives and express your thoughts on this law and how it will impact you and your state. Ask them to consider amending the law to truly exempt short term rentals at the shore. I strongly recommend calling over email as calls are viewed as far more valuable by legislators. For those not living in NJ, I would suggest that you contact the legislators who represent Long Beach Island and let them know exactly how these taxes are going to affect your visits to LBI and the amount of money you will be spending in their district. You can call their district office at 609-693-6700 or email them directly below.

Senator Christopher J. Connors
SenConnors@njleg.org

Assemblyman Brian E. Rumpf (Rep)
AsmRumpf@njleg.org

Assemblywoman DiAnne C. Gove (Rep)
AswGove@njleg.org

UPDATE: Beach Haven Borough is NOT applying their 3% Occupancy tax to rentals, only hotels/motels. 

In the end, savvy owners and travelers will hopefully not face significant cost increases as a result of this legislation, but it will certainly add unnecessary effort to the process. Owners who are aware of the requirements will likely make arrangements to exchange keys/codes through a local Realtor for a small fee. And Renters will likely pay a little bit more for their vacation because of it. Thankfully it won’t be anywhere close to 14.625% more. All of our renters can rest assured that I am working on a solution to save them money. I have no intention of ruining anyone’s Summer Vacation as a result of some misguided state legislation. If anyone has any questions, I invite you to contact me directly.