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Under new state law, short-term rentals subject to sales tax effective Oct. 1 - Ocean City Sentinel: News

Under new state law, short-term rentals subject to sales tax effective Oct. 1

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Posted: Wednesday, August 29, 2018 10:54 am

TRENTON – Operators of short-term rentals on such online accommodation services such as Airbnb, VRBO (Vacation Rentals By Owners) and HomeAway are required to pay state taxes and remit them to the state beginning Oct. 1.

Gov. Phil Murphy signed a bill on July 1 that imposes the state sales and use tax and hotel and motel occupancy fees on transient accommodations.

Under the current law, the sales and use tax and the state’s hotel and motel occupancy fees are imposed on hotels. 

Current law also permits certain municipalities to impose by ordinance similar taxes and fees for hotel room occupancies but not for rentals of real property. 

Under the new law, short-term rentals are required to pay the state’s 6.625 percent sales tax and a 5 percent hotel occupancy fee. These occupancy fees would be lower for municipalities that already impose municipal taxes on accommodations such as the 3.15 percent occupancy fee for the Wildwoods. 

The Office of Legislative Services estimates $6.9 million in taxes could be generated from Airbnb hosts, according to published reports. 

First Legislative District Senator Jeff Van Drew said he voted against the bill because the taxes place a burden on property owners renting out their homes. 

“Every time we make it harder for people to be involved in these small-business activities we end up dampening the activity and industry,” Van Drew said. “The answer to someone else being overtaxed is not to tax yet another business. If something wrong is happening to you and you’re getting taxed too much that doesn’t mean I should turn around and tax somebody else.”

Cape May County Chamber of Commerce President Vicki Clark said the New Jersey Tourism Industry Association supported the legislation’s passage. 

“The internet platforms like Airbnb and VRBO and all of those are a real competitor in the lodging industry and prior to this legislation did not require any collection of sales or local taxes. The legislation was very important to create more of a fair and competitive playing field,” Clark said. 

Unlike occupancy fees collected in the Wildwoods, which go toward tourism and event promotion, fees collected under the new legislation for transient lodging would go to the state treasury. 

“We are very pleased that not only the sales tax is in place for these rentals so they must comply with any local taxes that are in place. Unfortunately, none of this tax revenue is going to support tourism promotion. That is one area of the legislation that we were not successful in getting approved,” Clark said.

Home-sharing rentals like Airbnb offer temporary stays in the host’s home. According to published reports, there are 8,100 Airbnb hosts in New Jersey, earning the owners an extra $7,300 in income on average. 

 “Airbnb is a global dynasty. This is not somebody just renting out their garage to help pay the mortgage,” Clark said. “It’s a wonderful way to make additional money but we are in a tourism-driven economy and these are vacation rentals that are competing with businesses who are employing people whose livelihood is dependent on those rentals. These internet platforms renting out homes and apartments and rooms create an unfair playing field. I’m concerned about people being able to maintain their jobs and an ability to live here.” 

The lodging industry creates jobs that could be threatened if temporary accommodations don’t pay the same taxes hotels, motels and weekly rentals do, she said.

According to Clark, online platforms such as Airbnb, VRBO and HomeAway aren’t subject to the same fire codes, inspections and regulations that businesses have to comply with.  

She said online rentals are having an impact on the lodging industry, with customers booking online temporary rentals for a few days instead of weekly through real estate agencies. 

“We have to make sure that everybody in the industry is operating under the same rules and regulations,” Clark said.

 

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