For those of you who aren’t aware, back in July, New Jersey passed several new taxes as part of the budget approval. One of these taxes, promoted as the “AirBnB Tax”, was supposed to tax companies like AirBnB and VRBO to level the playing field for NJ hotels and motels. You may have heard that “shore rentals” were excluded from this tax. Turns out, that was only partially true. The way the tax law was worded, ALL short term rentals suddenly became taxable, with one exception. Rentals handled through a local Realtor. The rest of the rentals, whether setup through online “by owner” sites, Facebook, or with repeat renters, are all now subject to an 11.625% tax. The tax is made up of a 5% Occupancy Tax and a 6.625% Sales tax. Some municipalities add their own Occupancy Taxes that can bring the total tax rate on rentals to 13.625%. Aside from the Realtor exemption, there are no loopholes. Even the Realtor exemption won’t save renters any money. Local Realtors charge 12% to manage rentals and owners pass that cost along by increasing their rates, so whether by tax or by Realtor, it is a significant price increase for renters. The increased rental costs will reduce everyone’s vacation budgets which means people will cut back their spending while at the Jersey Shore. This would be devastating to the local businesses that depend on seasonal income from visitors to the shore.
Thankfully there is hope. Bill A-4520 has been introduced in the NJ State Assembly. This bill calls for a REAL “shore rental” exception to the current tax law. A-4520 is waiting to be (hopefully) assigned to a committee. This will require the Speaker of the NJ Assembly Craig J. Coughlin to assign the bill to a committee. Once in committee the bill can be voted on and hopefully sent to the full assembly for a vote. Assemblyman McKeon has said that he has bi-partisan support for his bill and said it will be on the Governor’s desk to be signed before the end of the year. If you’d like to help get this bill through, please call Speaker Coughlin’s office at 732-855-7441 and let him know that you support this bill.
Bill A-4520 has been moved to committee. The next step is to get additional co-sponsors signed on to the bill. If you would like to help, please visit this blog post for more information. A Senate version of the bill, S-3133 has been introduced as well. That is also good news as having concurrent bills speeds up the legislative process.
I am confident that this tax will be repealed before it does any harm to the Jersey Shore economy. If for some reason this tax remains in place, there are a couple of alternatives. Several local Realtors have reached out with an offer of a reduced fee of 5% (min $250 – max $500). Still a significant increase, but far less than the tax rate. As the time comes to sign leases and make rental payments, we will determine exactly how we are going to handle the tax situation. Hopefully it won’t come to that and we can all breathe a sigh of relief and get back to dreaming about next Summer at the beach.