Tax relief may be coming for property owners who privately rent out their homes for short periods of time — a common practice at the Jersey Shore — but it’s coming too late to avoid complicating this season’s rentals.
A bill passed by the Legislature this past week exempts those who do not use online services such as Airbnb from a 2018 law that extended New Jersey’s 6.625% sales and use tax and its 5% hotel and motel occupancy fee to private rentals of less than 90 days.
But property owners who use word of mouth or classified ads to rent their homes have already had to negotiate this year’s rent with the tax included, unless they used a real estate agency to handle the deal.
“The cautious property owners who had enough skin in the game — enough money in the game — would say, ‘We don’t want to pay a Realtor and don’t want to take a risk, so I’m going to register and collect the tax,’” said Florham Park state tax practitioner and certified public accountant Alan Preis.
“If there was already a June tenant, the tax presumably was collected,” Preis said.
Gov. Phil Murphy has 45 days to sign or veto the legislation, or it automatically becomes law. If he takes all that time, the rental season will be just about over, Preis said.
Earlier this year, a group of shore area homeowners started a group that sought to repeal the tax.
The tax was part of a series of state and local taxes that can range from 12% to 14% on top of what people already paid to rent a Jersey Shore home for a vacation.
The transient accommodations taxes apply to bookings made through either online travel companies such as Airbnb and VRBO — vacation rental by owner — or directly with individual homeowners.
The law was passed to ostensibly level the playing field between hotels and Airbnb rentals, but individuals who rent their homes out at the shore to vacationers were included.
The taxes do not apply if the booking is made through a licensed real estate professional.
Sponsors of the amending legislation included Assemblymen Vince Mazzeo and John Armato, both D-Atlantic; and Bruce Land and Matt Milam, both D-Cape May, Cumberland, Atlantic.
Murphy does not talk about whether he will sign legislation, and Mazzeo said he hasn’t heard whether Murphy is leaning toward signing it.
“I really don’t know if the governor will sign it or not because it is a tax for the state,” said Mazzeo. But he said the intent of the Legislature when it passed the original legislation in 2018 was to even out the playing field among hotels, motels and online rental services.
The intention was not to tax people who rented their properties on their own without such an online marketplace, Mazzeo said.
“The bigger pot of money is through the Airbnb rentals,” said Mazzeo.
According to a fiscal analysis by the state Office of Legislative Services, Airbnb has estimated 8,100 active hosts in New Jersey earn about $7,300 each in extra income per year.
“Based on these factors, annual earnings for all New Jersey hosts would be roughly $59.1 million on an annual basis,” according to OLS. “Had these transient accommodations been taxable, combined revenue from the state sales and use tax and the state hotel and motel occupancy fee would have yielded approximately $6.9 million.”