New Jersey short-term rental tax break bill goes to governor

The New Jersey Legislature has passed a bill that exempts some short-term rental operators from collecting lodging taxes from guests. The bill applies to operators with up to two short-term rental units who deal directly with guests rather than go through intermediaries such as Airbnb or Vrbo.

Governor Phil Murphy has 45 days from the day the bill was passed to sign it into law. Denise Payne, president of the New Jersey Shore Rentals Coalition, urged the governor to sign the bill quickly so short-term rental hosts can take advantage of the tax break this summer.

"The governor has it in his hands and can instantly make this summer’s vacations more affordable by eradicating the Airbnb tax on renters who chose the Jersey shore as their vacation destination through personal bookings," Payne said.

The legislation amends an earlier measure requiring all New Jersey short-term rentals that are either privately listed or arranged through online rental platforms to collect lodging taxes. The original law, which went into effect October 1, exempted short-term rentals facilitated by real estate agents from collecting the tax.

Vacation rentals on the Jersey Shore have often been listed privately rather than through online platforms, and many Jersey Shore hosts opposed the current law and welcomed the new bill. Airbnb, however, opposed the new bill and stated that it hosted a record-setting number of rentals on the Jersey Shore over Memorial Day weekend despite the new tax.

Short-term rental taxes generated around $3.3 million for the state from October through January, according to the New Jersey Department of Treasury, and the state expects to raise $8 million from short-term rental taxes in fiscal year 2019.

The current law requires state sales tax, hotel occupancy fees, and Meadowlands Regional Hotel Use Assessment fees — where applicable — to be paid on accommodations of fewer than 90 consecutive days. The law also allows some municipalities the option to impose new taxes and fees on short-term rentals.

Short-term rental operators must register with the state for tax purposes before they can start collecting lodging taxes from guests — unless all of their sales transactions go through an online rental platform or a real estate broker. In that case, the platform is responsible for collecting taxes and the operator doesn’t need to register.

HomeAway/Vrbo began collecting short-term rental taxes in New Jersey as of October 1. HomeAway collects state sales taxes, state occupancy fees, and Meadowlands Regional Hotel Use Assessment fees from guests on behalf of its hosts.

Airbnb also collects all the required state lodging taxes, along with municipal taxes for Elizabeth and Jersey City.

For hosts required to register with the state, MyLodgeTax can automate and simplify lodging tax compliance, ensuring that vacation rental operators charge the correct rates and file complete tax returns on time. For more on short-term lodging taxes in New Jersey, see our state Vacation Rental Tax Guide.