Do you list or stay in a New Jersey rental or vacation home which has been listed via transient space marketplaces such as Airbnb, VRBO, or HomeAway?
As of October 1, 2018, your stay or rental may become more expensive. A recent state law just passed which imposes sales tax (6.625%), State occupancy fee (5%), and a municipal occupancy tax (2% to 3%) on the rental of transient accommodations. Unlike sales tax and the state occupancy fee the municipal occupancy tax currently excludes Newark, Jersey City, Atlantic City, Wildwood, Wildwood Crest, and North Wildwood as other taxes are assessed in those areas.
Below are three scenarios that a taxpayer can expect to encounter when listing their homes via a transient space marketplace:
Scenario 1 –
Taxpayer opts out of listing the property through a transient marketplace and instead opts to list through a licensed real estate broker. In this case the real estate broker must advertise the rental, collects the rental payment from the renter and provides the key of the property to the renter thereby, removing the homeowner from the process entirely. Under these circumstances, the rental is not subject
to the above taxes.
Scenario 2 –
Taxpayer lists the property through a transient space marketplace and uses the marketplace exclusively to complete the transaction including receipt of payment by the customer. In this case, the marketplace is required to collect all applicable taxes from the customer and remit to New Jersey Division of Taxation on the taxpayer’s behalf.
Scenario 3 –
Taxpayer lists the property through a transient space marketplace and uses the marketplace only to make the reservation. In this case, it is the responsibility of the taxpayer to collect payment for the rental and all applicable taxes. The taxpayer is then responsible for the remittance of the taxes to the New Jersey Division of Taxation. In order to begin collecting and remitting sales tax, the taxpayer must register with the state by filing a business registration application on Form NJ‐REG.
In addition to seeking the best market rates for a rental, be certain that as a provider of rental properties that all applicable taxes are collected and remitted timely. As always, be sure to contact your tax advisor before placing your unit on the rental market.