The New Jersey Assembly recently passed legislation that would impose taxes on “transient space marketplaces” like Airbnb. The bill, Assembly Bill No 4587, now heads to the state Senate.
According to Airbnb, approximately 6,000 New Jersey “hosts” earned more than $50 million last year. Nonetheless, an increasing number of New Jersey municipalities are placing restrictions on short-term home rentals. They include Palisades Park, Englewood Cliffs, Fort Lee, Lyndhurst and Glen Rock. Other cities, including Newark and Jersey City, have negotiated agreements directly with Airbnb to collect a six (6%) percent tax.
Under current law, New Jersey imposes the sales and use tax and the hotel and motel occupancy fee on the rent for each hotel room. In addition, current law authorizes municipalities to impose various taxes and fees on the rent for each hotel room in those municipalities.
AB 4587 would extend the state sales and use tax and hotel and motel occupancy fee to transient accommodations. A transient accommodation is defined in the bill as a “room, group of rooms, or other living or sleeping space for the lodging of occupants, including but not limited to residences or buildings used as residences.”
The proposed legislation also authorizes municipalities to impose the following taxes and fees on transient accommodations where applicable:
- Hotel Occupancy Tax
- Atlantic City Luxury Tax
- Atlantic City Promotion Fee
- Cape May County Tourism Sales Tax
- Cape May County Tourism Assessment
- Municipal Occupancy Tax
- Sports and Entertainment Facility Tax
- Meadowlands Regional Hotel Use Assessment
“Our laws need to be updated to keep up with changes brought about by new technology," the bill sponsor, Assemblywomen Annette Quijano, said in a statement. "The fact that taxes are not paid for stays at locations rented through sites like Airbnb, but are applied to stays in hotels is an unfair advantage that hurts the hospitality industry and takes funding away from municipalities for important programs. This bill levels the playing field and provides tax fairness for the entire hospitality industry in New Jersey."
Lawmakers are also considering additional legislation to regulate short-term rentals. Among other provisions, Assembly Bill No. 4441 would codify that municipalities are authorized to ban short-term home rentals by requiring a minimum 30-day rental agreement and would require hosts to first register with their municipality.
For more information about the proposed bill to tax transient accommodations or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.