Beach House for Fun and Profit

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New Jersey 2019 Budget and New Taxes on Airbnb/VRBO Rentals

Lawmakers in New Jersey have passed a budget for fiscal year 2019 and as a result, one change affects the bottom line for hosts who choose to list New Jersey rentals on Airbnb or VRBO.

Beginning October 1, 2018, online rental marketplaces like Airbnb or VRBO must collect the state 6.625% sales tax, any applicable municipal taxes, and the 5% hotel occupancy fee.

Strangely, Airbnb does not seem disappointed by this bill.  The full article is here, but Josh Meltzer, head of Northeast public policy for Airbnb was happy the bill was passed.  The article quotes him as saying, “Airbnb has fought for years to ensure that the short-term rental community can contribute tax revenue to support public services throughout New Jersey.”

Airbnb already collects taxes in the New Jersey municipality of Jersey City, so you can expect Airbnb to collect the taxes and fees (Update here) on the front in for the guest…at least making this a non-issue for the host to worry about collecting and remitting.

 

However, it may have an impact on whether guests choose to find you through Airbnb or the local agency.  Oddly, the brick and mortar rental agencies are not required to collect a state sales tax…at this time.  You may have already seen my post touting Airbnb over local Ocean City rental agencies because of the latter’s exorbitant ~15% commissions.  This development changes that calculus.  The conclusion of that earlier post, was that the bonus of using Airbnb was that one could post a rate 11% less than the local agencies (Fox, Berger, etc.) and net the same amount of money.  6.625 + 5 = 11.625% and this effectively makes Airbnb and the local agencies awash, if not a bit worse, from a cost perspective in a rental transaction.  I will not need to adjust my rates, per say, as the renter will be charged the state taxes and fees on top of my rate (see the Jersey City example above) while the agency commission comes out of my rate.  However, it will be interesting to see what effect this has on the marketplace.  In 2018, I had just one week rented through a local agency.  I will update this post with what the 2019 number looks like when this is fleshed out.  The bottom-line is I am trying to maximize my return and this can do nothing but hurt the bottom-line.

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1 Comment

  1. It will not be long before Trenton comes to collect the sales tax from the local brokers too.

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