Privately Booked Rentals No Longer Subject to 11.6 Percent Levy
Trenton — Private homeowners no longer face paying the so-called Airbnb tax for renting out their accommodations, under a fix that was signed by Gov. Murphy on Friday, Aug. 9. The tax law enacted last October has been tacking on an 11.6 percent tax to short-term rentals done through private owners and online marketplaces – 6.625 percent sales and use tax and 5 percent hotel and motel occupancy fee.
Now, as of Aug. 8, that fee no longer applies to the private homeowners renting out accommodations, which is a victory for a homeowners coalition that fought for its repeal.
“It was wrong; it should never have happened in the first place,” said Duane Watlington, vice president of the New Jersey Shore Rentals Coalition, which fought for repeal of the section that taxed private homeowners. “The original intent of the law was not to tax the shore; it’s way too important an economy. The shore tourism economy has been estimated at $43 billion a year.”
Said state Sen. Bob Andrzejczak, one of the rollback bill sponsors, “The law was originally intended to apply to major commercial companies such as Airbnb, but it ended up hurting private renters up and down the shore. Folks that have been renting their shore homes to the same families for years aren’t doing it to make a fortune, but more so to offset the cost of home ownership. The original law was never meant to hurt independent renters, and luckily this legislation will correct things so that it no longer does.”
The amendment bill (A4814) had been on the governor’s desk since June 27.
Murphy’s statement Aug. 9 was “Our shore economy adds tremendous vitality and dynamism to New Jersey. Access to affordable rental properties for visitors and income on rentals for homeowners are the backbone of that economy.”
The shore rentals coalition hired a banner plane to spread the word across the beach Sunday that the tax no longer applies to space rented by private homeowners.
“If you book direct with an owner or through a Realtor, your vacation rental is free of the tax,” said Watlington. “But if a third party collects the payment and issues the contract – a third party such as Airbnb or VRBO or a travel agent – the transaction is taxable.”
Incidentally, the firm VRLBI (Vacation Rentals LBI) that Watlington founded does not do bookings, so its listings were not taxed directly. The company is a classified listings website of rentals that are booked with the owner. That is unlike Airbnb, for instance, whose listings are booked online.
The tax bill signed by the governor last October had required homeowners who rented their accommodations out privately to collect the tax, keep records, and remit the tax to the New Jersey Division of Taxation. That ended after Aug. 8 with the signing Aug. 9 of the rollback bill, but the tax had started to deter some renters of those homes from re-booking, according to news reports and word on area social media.
“We started seeing a lot of that once July came around and our owners were not getting their bookings renewed,” Watlington told The SandPaper. “Normally they say they’re coming back, but this year they said, ‘We don’t know about next year because of this tax.’”
Watlington said the call for repeal originated last Chowderfest weekend in October. Homeowners who stopped by the VRLBI table at the Merchants Mart started talking about a need to oppose the tax levy, he said.
“They were homeowners who said we need to organize, and one of the homeowners had done this previously, helped move legislation through the state with the help of a public policy advocate,” Watlington said. “We exchanged phone numbers, and we met for coffee a week later and we interviewed public policy firms and hired one to represent us in Trenton. First we had formed a nonprofit 501(c)(6), like a business league, that can raise money and lobby. Also, a lot of the owners on LBI met with their local (state) Assembly people.”
Primary sponsors of the legislation included Assembly members Joann Downey, John McKeon, John Armato, Bruce Land, Wayne DeAngelo, Eric Houghtaling, Vincent Mazzeo, Nancy Pinkin, Matthew Milam, Valerie Vainieri Huttle, and Senators Vin Gopal and Bob Andrzejczak. Watlington also credited Assemblywoman Dianne C. Gove (R-9th) for helping the movement.
“Over the past several months, we’ve listened to Jersey Shore homeowners – many of whom are still recovering from Hurricane Sandy – who are worried they’ll see far less summer guests this season as a result of the short term rental tax. Summer tourism is the heartbeat of the shore, and this law was never intended to hurt the private homeowners who help it grow and thrive,” said Assembly bill sponsors in a joint statement.
Advocates for the private rental community also praised the legislation.
“The NJ Shore Rentals Coalition is deeply gratified for the governor’s decision to keep vacations at the shore affordable,” said Denise Payne, president of the NJ Shore Rentals Coalition. “By signing this bill into law the governor is both proving New Jersey is a tourism friendly state and protecting the integrity of the business economy along the shore. The coalition applauds the efforts of lawmakers throughout the state who recognized that this tax law needed to be corrected and worked together to make it happen.”
— Maria Scandale