Many Jersey Shore summer rentals spared from 'Airbnb' tax after Murphy signs law
New Jersey vacationers, particularly those who rent places at the Jersey Shore, will be spared taxes totaling 11.6% on short-term rentals if they make their arrangements with homeowners who rent up to two units themselves.
Gov. Phil Murphy signed a bill on Friday, six weeks after the state Legislature passed the measure, that exempts the homeowners from taxes now paid by those who rent from online vacation rental markets such as Airbnb and VRBO.
It gives the homeowners the exemption enjoyed by owners of vacation units rented by licensed real estate brokers. The law was promoted by the NJ Shore Rental Coalition, which drummed up support from owners along the Jersey Shore who wanted the same deal.
“By signing the bill into law, the governor is proving New Jersey is a tourism-friendly state and is protecting the integrity of the business economy along the shore,” said Coalition President Denise Payne. “The coalition applauds the efforts of lawmakers throughout the state who recognized that this tax law needed to be corrected, and worked together to make it happen.”
Debbie Donnelly, who owns a cottage in Ocean Grove, said she had to cut its prices this summer, which he attributed in part to the tax. She still have a week open in August.
"That's unheard of," she said. "August is when you make your money."
The bill passed unanimously in both houses of the Legislature.
Murphy said he signed the bill after determining that the exemptions extended to the vacation homeowners was in keeping with the intent of the 2018 bill. The law brought parity between those rentals booked by companies like Airbnb, travel agencies, and New Jersey hotels and motels.
Those entities are required to charge the state’s sales and hotel tax, which total 11.6%.
Airbnb had opposed the bill, insisting that the owners of vacation rentals should not be treated differently from the online site, which provides an online marketplace for private owners to list their vacation rentals.
But Murphy said he had heard the outcries from the vacation rental owners, who didn’t want to tack on the tax to their rental agreements.
“[The] Shore economy adds tremendous vitality and dynamism to New Jersey,” said Murphy. “Access to affordable rental properties for visitors and income on rentals for homeowners are the backbone of that economy. Our public policies must be well-calibrated to allow this economy to thrive and grow.”
However, state Sen.Declan O’Scanlon and Assemblywoman Serena DiMaso, both R-Monmouth, said Murphy should have acted earlier to blunt the tax impact on bookings this summer.
“While I applaud the governor signing this bill, it’s been on his desk since June 27, and it is now August 9,” DiMaso said. “Many families have already been deterred from renting down the Shore, and the number who might do so in the next three weeks of summer surely cannot make up the amount of revenue lost this tourism season.”
The tax has not hurt Airbnb bookings, according to Airbnb spokeswoman Liz DeBold Fusco. Bookings through the online site are expecting to grow 27 percent this summer, to 201,000, with rental income to owners expecting to hit $47 million.
But Duane Watlington, owner of VRLBI.com, which has more than 800 listings on Long Beach Island, said there was twice as many rental vacancies this summer, compared with previous years. He attributed the downturn to the occupancy tax, noting that other factors that normally affect summer tourism — gas prices, the economy, the weather — were in good shape.
Rentals through Watlington's site are exempt from the tax because renters book directly through owners — not his online platform, he said.
“The vacationers that did come had less disposable money to go out,” Watlington said. “We’re hopeful there will be more people here during the week and the restaurants will have waits again.”
The bill had 11 sponsors in the state Assembly, including Valerie Vaineri Huttle, D-Bergen.
“Over the past several months, we’ve listened to Jersey Shore homeowners — many of whom are still recovering from Hurricane Sandy — who are worried they’ll see far less summer guests this season as a result of the short-term rental tax,” the sponsors said in a statement. “Summer tourism is the heartbeat of the shore, and this law was never intended to hurt the private homeowners who help it grow and thrive.”
State Sen. Vin Gopal, D-Monmouth, said he’d heard from rental owners who felt the tax pinch from cost-conscious vacationers.
“At a time of the year when business should be booming, local homeowners have been struggling to fill rental slots for summer visitors,” he said. “A bad summer at the Shore could have a damaging ripple effect across our state’s entire economy.”
Contact Tax Watch columnist David McKay Wilson at firstname.lastname@example.org