Content provided by our partner Chris Whalen, CPA ~
Starting October 1, 2018 NJ will impose taxes on short-term property rentals.
This is a substantial change to NJ law. If you have short-term real estate rentals I urge you to schedule a consultation with my team right away.
New Jersey has come up with the term “Transient Rentals” to describe the rental of Real Estate for a period of less than 90 days. This can include the rental of a single room, or an entire home. The term does not apply to Hotels, Motels, Dormitories, Campsites, Meeting Rooms, Hospitals or Nursing Homes. These facilities are already subject to their own taxes and fees.
The Transient Rental designation will affect all short-term vacation rentals and homeowners who rent out rooms on a short-term basis through services such as Airbnb. You will be subject to taxes on rentals whether you use a service such as Airbnb, which is termed as a Transient Space Marketplace, or rent the property yourself through a classified ad or sign on the street.
However, if you use a Transient Space Marketplace, they would be required to collect and pay all applicable taxes on your behalf.
If not, the individual property owner is required to register collect and remit all applicable taxes.
A Transient Space Marketplace does not charge the property owner for placing an ad on their website. They collect all rents and fees from the renter, and remits a net amount to the property owner after deducting its fees and expenses.
A service that charges an upfront fee for placing an ad for rental and does not collect the rent from the customer, is not considered a Transient Space Marketplace.
There are exceptions to the Transient Rental designation that would exempt a property owner from becoming subject to the additional taxes on rentals. These include:
- Furnished or unfurnished private residential property, including but not limited to condominiums, bungalows, single-family homes, and similar living units, where no maid service, room service, linen-changing service, or other common hotel services are made available by the lessor, 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 location of an offsite real estate broker licensed by the New Jersey Real Estate Commission.
- Rental to a non-profit organization that has been granted an exemption from ST-50.
- Rental to the federal government or the State of New Jersey or any of their agencies or instrumentalities.
If your property rental is considered a Transient Rental, it will be subject to ALL of the following taxes:
The law imposes Sales Tax on charges for the rental of transient accommodations at the rate of 6.625 percent.
State Occupancy Fee:
The law imposes the State Occupancy Fee at the rate of 5 percent on charges for the rental of transient accommodations that are subject to Sales Tax. However, in municipalities where the rental of transient accommodations are already subject to a local tax on occupancies, the State Occupancy Fee is imposed at a lower rate (Atlantic City: 1 percent; Newark and Jersey City: 1 percent; and the Wildwoods: 3.15 percent).
Municipal Occupancy Tax:
The law authorizes any New Jersey municipality, other than Newark, Jersey City, Atlantic City, Wildwood, Wildwood Crest, and North Wildwood, to amend or adopt an ordinance that imposes the Municipal Occupancy Tax on charges for the rental of transient accommodations in that municipality, which can be up to 3 percent.
Meadowlands Regional Hotel Use Assessment:
Charges for the rental of transient accommodations located in the Meadowlands area are subject to the 3 percent Meadowlands Regional Hotel Use Assessment. The municipalities are: • Bergen County – Carlstadt, East Rutherford, Little Ferry, Lyndhurst, Moonachie, North Arlington, Ridgefield, Rutherford, South Hackensack, Teterboro; and • Hudson County – Jersey City, Kearny, North Bergen, Secaucus.
Atlantic City Promotion Fee:
The law authorizes Atlantic City to adopt or amend an ordinance that imposes a one dollar per day Atlantic City Promotion Fee on charges for the rental of transient accommodations in Atlantic City. The fee applies to each occupancy of a room or rooms, other than as a place of assembly. The fee is imposed on the seller of the transient accommodation occupancy. The fee is included in the sales price for both Sales Tax and Luxury Tax purposes if billed to the customer, regardless of whether or not it is separately stated. The Atlantic City Promotion Fee will apply to charges for the rental of transient accommodations on the first day of the first full month following 90 days after receipt of the ordinance by the State Treasurer.
Atlantic City Luxury Tax:
The law also authorizes Atlantic City to adopt or amend an ordinance that imposes the 9 percent Atlantic City Luxury Tax on charges for the rental of transient accommodations which occur for less than one year in Atlantic City. If the transient accommodation is for less than 90 days, Sales Tax is imposed at the rate of 3.625 percent. The Atlantic City Luxury Tax will apply to charges for the rental of transient accommodations on the first day of the first full month following 90 days after receipt of the ordinance by the State Treasurer. Note that a 1 percent State Occupancy Fee is additionally imposed on charges for transient accommodations in Atlantic City.
Sports and Entertainment Facility Tax – Millville:
The law authorizes Millville to adopt or amend an ordinance that imposes the 2 percent Sports and Entertainment Facility Tax on charges for the rental of transient accommodations which occur in Millville. Millville is currently the only municipality that imposes the Sports and Entertainment Facility Tax.
Cape May County Tourism Tax and Assessment:
The law authorizes Wildwood, Wildwood Crest, and North Wildwood to adopt or amend an ordinance that imposes the 2 percent Cape May County Tourism Tax and the 1.85 percent Cape May County Tourism Assessment on charges for the rental of transient accommodations which occur in Wildwood, Wildwood Crest, and North Wildwood.
Required Document Retention:
Transient space marketplaces are required to keep the following information for four years after the transaction occurs:
- The name of the person who provided the transient accommodation or hotel room;
- The name of the customer who purchased the transient accommodation or hotel room;
- The address, including any unit designation, of the transient accommodation or hotel room;
- The dates and nightly rates for which the consumer purchased the transient accommodation or hotel room;
- The municipal transient accommodation registration number, if applicable; • A statement as to whether such booking services will be provided in connection with (i) short-term rental of the entirety of such unit, (ii) short-term rental of part of such unit, but not the entirety of such unit, and/or (iii) short-term rental of the entirety of such unit, or part thereof, in which a non-short-term occupant will continue to occupy such unit for the duration of such short-term rental;
- The individualized name or number of each such advertisement or listing connected to such unit and the uniform resource locator (URL) for each such listing or advertisement, where applicable; and
- Such other information as the Division may require.
This new law is broad and sweeping and will impact many people who have short-term rentals in the state of NJ. I urge you to contact me and my team to schedule a consultation to see how these laws will impact you.
Please reach out to me without hesitation with any tax, business or accounting question, and to schedule a consultation.
“If We Aren’t Working For You, Then You Aren’t Working At Your Best”
Chris Whalen, CPA
79 Oak Hill Road
Red Bank, NJ 07701