Some visitors to the Jersey Shore this year for the first time are paying a hefty tax — 11.625% plus any local room tax — on their short-term housing rental. That’s what motels have long paid, and the state extended the levies to accommodations through online marketplaces such as Airbnb as part of last year’s budget deal.
Shortly after that became law, the state Division of Taxation made clear the taxes also now applied to any rental less than 90 days unless it was made through a licensed real estate agency.
Since then, legislators have said that wasn’t their intent. In June, they passed a bill sponsored by Sen. Bob Andrzejczak, D-Cape May, Atlantic, Cumberland, to exempt all private rentals not contracted and paid for through a marketplace.
The taxes have taken away a competitive advantage enjoyed for many decades by people who rent out condos and homes at the shore. They haven’t had to charge their customers as much as 14% more for their vacation rentals and have been spared the work of registering and complying with the attendant state tax regulations.
Putting those taxes and that regulatory burden on people renting rooms in their homes and such through Airbnb was part of last year’s budget revenue compromise between Gov. Phil Murphy and legislative leaders. Murphy’s top revenue objective had been bringing back an additional tax on personal incomes above $1 million — the so-called millionaire’s tax — but legislators would only give him an added tax on incomes over $5 million. The so-called Airbnb tax provided another, albeit smaller, revenue stream. He called it a dumb alternative “when you can easily tax millionaires.”
Well, not so easily if the Legislature won’t cooperate. This year it again denied the governor his millionaire’s tax.
Which brings us to the mystery of the moment. The bill exempting nonmarketplace private short-term housing rentals from the taxes has been sitting on Murphy’s desk for a few weeks at the height of the summer tourism season. Thousands of vacation rental owners would dearly love to quit collecting the tax, tell their customers it was all a mistake and refund whatever tax has already been paid. Murphy has declined to comment on the bill’s status.
The governor and Senate President Stephen Sweeney, leader of the South Jersey Democrats, have been feuding, so perhaps Murphy is simply letting the region’s tourism industry twist in the wind awhile. Since the tax relief passed the Legislature unanimously, presumably overriding a Murphy veto would be possible.
But it’s also possible that this year could bring another revenue deal between the state’s top Democrats. Last year, early in the process Sweeney proposed taxing all vacation room and home rentals equally, calling it fairer and the standard practice for other East Coast states. Arguing against a deal is the gulf between Murphy and Sweeney that political experts believe won’t be bridged anytime soon, and the looming November election with every Assembly seat on the ballot. Legislative leaders have said repeatedly that they don’t want new taxes in this, a campaign year.
Every week that passes without Murphy’s signature on the bill, the taxes are collected, the size of that additional revenue becomes clearer and the reaction of visitors and rental owners can be gauged better. In perpetually revenue hungry New Jersey, people and businesses are always at risk.