But Bills Seek Reprieve for Homeowners
For private homeowners wanting to offer a room/house for rent next summer, there is bad news and hopeful news on the rental tax law front this week, as the Oct. 1 enactment of a new law is here.
First, interestingly enough in this changing situation, although the law states that it takes effect Oct. 1, the online link for the required registration now states that it is unavailable until at least Oct. 8.
Another development is that two pieces of legislation have been introduced in an effort to exempt private homeowners from the law.
To back up for those not conversant on this rule signed by Gov. Murphy July 1 – which was most people until recently, when they heard statewide news reports as the Oct. 1 date neared – the law passed during what was said to be hectic state budget negotiations.
It affects rentals not done through a real estate agent.
An original version had been intended to only tax online services such as Airbnb, VRBO and Homeaway to level the field. Supporters noted that the online services have taken some business from licensed real estate firms, and should also pay the occupancy taxes that hotels/motels do.
However, the version that emerged included private homeowners along with the online services. It requires private homeowners who rent their houses or rooms on a transient basis (for less than 90 days) to collect the state’s 6.625 sales tax and 5 percent occupancy tax. Municipalities also can collect taxes of up to 3 percent.
If you’re a vacationer booking through online sites such as Airbnb and VRBO, the new law says you’ll be paying the 11.6 percent occupancy tax.
Meeting with legislators last week was Duane Watlington, owner of VRLBI.com (Vacation Rentals LBI). Watlington began leading a charge for revision and clarification of the law. (VRLBI is a listing website that does not do bookings, so it is not directly affected by the law. But speaking as a private homeowner, he asserts the tax could hurt the shore economy.)
On Monday, Oct. 1, Watlington updated The SandPaper with changes that happened late last week. Therein lies the bad news/hopeful news.
An updated interpretation of the law by the Division of Taxation was posted online late Friday night, he said. It can be found at state.nj.us/treasury/taxation/pdf/TB-81R.pdf.
“It did not exempt the ‘For Rent by Owner’ rentals, like we were all hoping it would,” Watlington said. “Instead, it closed the ‘Key Loophole’ that was allowing some Realtors to offer a key exchange, for a nominal fee, to the For Rent by Owner group.
“The way the ‘Advisory’ reads now is, that you must use a Realtor for the rental agreement, collection of funds, and distribution of the key/code. Here is the exact text:
“‘… And the rental transaction is executed by a real estate broker licensed by the New Jersey Real Estate Commission pursuant to N.J.S.A. 45:15-1 et seq., and where the keys to the property, whether a physical key, access to a keyless locking mechanism, or other means of physical entrance to the property, are provided to the lessee at the offsite location of the licensed real estate broker.’”
For the private owners who wish to rent on their own, there is hope in new legislation, according to Watlington.
“We are now on to plan B. Since we (the For Rent by Owners) couldn’t get the clarification we wanted, Assemblyman DeAngelo (District 14) and Assemblyman John McKeon (District 27) introduced A-4520 for us, that will ‘exclude transient accommodations (vacation rentals) in shore counties from various state and local taxes.”
Watlington added, “In addition, similar legislation, A-4539, was introduced by Assemblymen Land and Andrzejczak (District 1, Cape May County) and so was an identical Senate bill (S-3033) by Senator Van Drew (District 1, Cape May County) that ‘repeals imposition of state sales and use tax and hotel and motel occupancy fee on transient accommodations; repeals authorization of various municipal taxes and fees on transient accommodations.’
“What I am happy with the most is that there is bipartisan support from the Legislature as evidenced by these new bills that were introduced.”
VRLBI has secured the domain name NJShoreTax.com, which will contain information on how to contact legislators to ask them to eliminate what is being called a “shore tax.” Watlington hopes to launch this new website later this week.
— Maria Scandale