False alarm, Jersey Shore: Vacation homes not part of ‘Airbnb tax’

Property owners who rent out their Jersey Shore vacation homes got a startling surprise this month, when a bulletin from the Division of Taxation indicated they’d be included in a new law requiring people who rent their homes through Airbnb to begin charging sales and occupancy taxes.

The state is now changing direction, though it hasn’t yet released new guidance.

Duane Watlington of Vacation Rentals LBI was alarmed when the Division of Taxation said the new law, enacted July 1 and taking effect Monday, would apply to short-term, for-rent-by-owner home rentals that don’t go through a Realtor.

“It was not supposed to be a tax on the Jersey Shore,” Watlington said. “And the way the Legislature wrote the bill, it was very vague.”

The new law adds around 12 percent to 15 percent to the cost of transient accommodations, putting them on par with hotels and motels.

“On an average $5,000 a week vacation rental on Long Beach Island, you’re talking about adding $600 or more on tax on top of that, which could push travelers to other states looking for a cheaper vacation experience,” Watlington said.

“Or, if they still do come to the Jersey Shore, their expendable budget is going to be reduced and they won’t be going out to dinner as much, playing miniature golf or buying that LBI sweatshirt that they buy every year,” he said.

It would have been unusual for the tax to begin applying to Shore rentals, given that Gov. Phil Murphy opposed the concept when it was floated by Senate President Steve Sweeney during the budget impasse in June.

Last week, the Division of Taxation deleted that information from its website and said new guidance would follow pending further review. More than a week later, it still hasn’t been released.

“The goal of this policy change is to level the playing field statewide between existing hotels and motels and transient accommodations conducted through new online marketplaces,” said Treasury Department spokeswoman Jennifer Sciortino. “This law is not expected to apply to the vast majority of reported short-term shore rentals. We are in the process of reworking the guidance issued by Taxation to alleviate any confusion.”

Believe it or not, given New Jersey’s reputation for high taxes, the state will become one of the last to apply occupancy and sales taxes to short-term rentals brokered through online sites like Airbnb.

“Short term rentals in New Jersey are going to be taxed basically just like hotels and just like any hotel or short-term rental or Airbnb anywhere else in the U.S.,” said Rob Stephens, general manager of the tax compliance company Avalara MyLodgeTax.

“Florida, Texas, California, Hawaii – again, any other state, any other location, these taxes have long been part of the short-term rental transaction,” he said.

Stephens said there could be a period of adjustment for property owners who rent through online platforms, as people are less aware of how to file taxes typically handled by businesses.

“It’s not necessarily rocket science, but again it’s just something people never thought of, never dealt with before. It’s not necessarily straightforward so it does create complexity and risk for people not doing it correctly or not doing it at all,” Stephens said.

New Jersey: Decoded cuts through the cruft and gets to what matters in New Jersey news and politics. Follow on Facebook and Twitter.

Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at michael.symons@townsquaremedia.com