NJ Legislative Spotlight: A4048/The “Airbnb Tax”

Online marketplaces such as Airbnb that offer short-term house and room rentals would be taxed like hotels under a proposal introduced in the state Assembly this week. The bill, A-4048 would impose a 7 percent sales and use tax and a 5 percent transient accommodation fee on accommodations booked through Airbnb and similar websites, such as Homeaway. The bill would also authorize certain municipalities to impose a 3 percent transient accommodation tax.

What might happen next in NJ?

Background and Current Law

Under the current NJ law, the state imposes a 7% sales and use tax and a 5% hotel and motel occupancy fee on hotel room rentals. Additionally, the current law allows for certain municipalities to impose a local hotel occupancy tax of up to 6%. These rates and taxes do not apply to short-term rentals or occupancies that are booked via online marketplaces such as Airbnb. As a greater number of both business and leisure travelers turn to these platforms due to their affordability, flexibility, and stylish accommodations, lawmakers (not just in NJ) see a need to keep up.
Proposed Changes

Under A4048—introduced by Assemblywoman Annette Quijano (D-Union) and Assemblywoman Valerie Vainieri Huttle (D-Bergen)– the State of NJ would change current transient accommodation fees and taxes that would allow the state to:

  • Impose a 7% sales and use tax;
  • Impose 5% transient accommodation fee on charges for short-term rentals rented through a transient marketplace;
  • Allow for certain towns to impose a 3% transient accommodation tax on certain charges for providing space for the accommodation of transient guests;
  • Limit the imposition of the taxes and fees to the taxable space for accommodation of a transient guest that is provided by a person engaged in the business of providing this space.

It’s important to understand that to be considered “engaged in business” as a transient accommodation, a person must be engaged in the activity of providing space for accommodation to the public as a business activity. This includes the placement of an advertisement or the listing of the space for accommodation on marketplace such as Airbnb or Homeaway). The only caveat is that the person (or landlord) must have cumulative gross receipts from charges (for providing space for accommodation to transient guests in this state) in excess of $1,000 during the preceding four calendar quarters. A quick search of Airbnb indicates that it’s not that hard to cumulate $1,000 in gross receipts from a short-term rental.

Interestingly, the bill allows the Director of the Division of Taxation to enter into an agreement with the owner or operator of a transient space marketplace for the purpose of collection and payment of the tax. Upon entering into such an agreement, the State may waive the responsibility of a person engaged in the business of providing space for accommodation to collect and pay the tax, placing the onus on the marketplace instead. The owner or operator of the transient space marketplace shall then agree to be liable for the collection and payment of the fee, which may seem more digestible to some landlords engaging in short-term rentals.

An increasing number of states will follow in the footsteps of states such as New Jersey and New York to best understand how to tax and regulate transient space marketplaces and many will look to the leadership and experience of NJ as it happens. DMGS will continue to monitor the progress of A4048 and other similar legislation as they moves through the NJ Assembly and other legislative bodies.
Brett Goldman, DMGS Manager for Special Projects and Christian Lizana, DMGS Summer Intern contributed to this report.

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