New Law Creates Airbnb Tax in New Jersey

Rob Stephens, co-founder and general manager of Avalara MyLodgeTax, recently weighed in on the new Airbnb tax regulation passed for the state of New Jersey. Here's what he says you need to know if you own or manage a short-term vacation rental property in the state:

New Jersey Governor Phil Murphy has signed a bill into law that imposes the same lodging taxes on short-term rentals that hotels and motels pay. The change means operators of short-term rentals that are booked through companies such as Airbnb, VRBO, HomeAway, or others are now required to add these taxes to guests’ bills and remit them to the state.

Beginning October 1, short-term rentals will be subject to the state's 6.625 percent sales tax and 5 percent hotel occupancy fee, although the occupancy fee is lower in cities that have their own municipal tax on accommodations. That includes Atlantic City, Jersey City, and Newark, where the state fee is 1 percent, and the Wildwoods, where it’s 3.15 percent.

Many municipalities in New Jersey also levy their own municipal occupancy taxes on hotels. The new law allows municipalities the option to impose new taxes and fees on short-term rentals, including: hotel occupancy fee, Atlantic City luxury tax, Atlantic City promotion fee, Cape May County tourism sales tax, Cape May County tourism assessment, sports and entertainment facility tax, and Meadowlands regional hotel use assessment.

Short-term rental operators must register with the state for tax purposes before they can start collecting lodging taxes from guests.

While Airbnb collects lodging taxes on behalf of its hosts in many states and cities, in New Jersey, it only collects Jersey City’s municipal occupancy tax of 6 percent. Jersey City short-term rental hosts will be responsible for collecting and remitting state taxes themselves, unless Airbnb comes to an agreement with the state to collect those taxes for bookings on its site.

All other New Jersey short-term rental hosts will be responsible for registering for a tax ID number, collecting all lodging taxes from guests, filing lodging tax returns, and remitting collected taxes.

Automated tax software such as MyLodgeTax can help short-term rental hosts ease the burden of complying with the new taxation law in New Jersey.