This law is repealed BUT – THIS WILL NOT BE RETROACTIVE TO 10/1/2018.
Important Notice to Sellers and Purchasers of Transient Accommodations
Amendments to the Sales and Use Tax Act and Other Applicable Taxes and Fees
Effective August 9, 2019
(P.L. 2019, c.235)
On and after August 9, 2019, rentals of transient accommodations are no longer subject to the Sales Tax, the State Occupancy Fee, and other applicable taxes and fees on occupancies, unless the rental is either obtained through a transient space marketplace, which includes a travel agency, or is considered to be a professionally managed unit, as defined in the new law.
A professionally managed unit is a rental unit that is directly or indirectly owned or controlled by a person renting three or more separate units during a calendar year. A professionally managed unit is subject to the Sales Tax, the State Occupancy Fee, and other applicable taxes and fees on occupancies, whether the rental is obtained through a transient space marketplace, including a travel agency, or directly through the owner (such as through local newspaper ads, personal referrals, signage, etc.). All other rentals that are obtained directly through the owner are no longer subject to the Sales Tax, the State Occupancy Fee, or other applicable taxes and fees on occupancies.
More detailed information for owners and renters of transient accommodations is available at Transient Accommodations Frequently Asked Questions.
For guidance prior to August 9, 2019 see publication TB-81R – Taxes Imposed On Charges For The Rental Of Transient Accommodations.
From 10/1/2018 through August 9, 2019, there is still an obligation to pay the short term rental sales tax if it applies to you.
To listen to the podcast version of memo click here —> Podcast Version
Governor Murphy has signed the repeal of this law.
Both the Assembly Bill A4814 and Senate Bill S3158 Passed.
This repeal makes transient accommodation taxes and fees only applicable if rented through a transient space marketplace. (meaning Airbnb and VRBO, etc.) Individual landlords would not have to collect and remit sales tax.
This is great news!
Follow the details here: NJ Bill Number S3158
IMPORTANT NOTE 1: It is NOT enough for a real estate broker to only hold the keys or other means of physical entrance to the property to avoid a sales tax liability. See detailed requirements below. Remember, if the division of taxation audits you, and finds sales tax should have been collected, the landlord, NOT the real estate broker, will be liable for the taxes and associated interest and penalties.
IMPORTANT NOTE 2: Room rentals in Wildwood, Wildwood Crest, and North Wildwood are subject to a grand total in taxes of 13.625%. This is derived from 10.475 percent in taxes and assessments (6.625 percent New Jersey Sales Tax; 2 percent Tourism Tax; 1.85 percent Tourism Assessment), in addition to the Occupancy Tax of 3.15 percent.
IMPORTANT NOTE 3: There is no Sales Tax Due if the occupancy occurs for at least 90 consecutive days (permanent resident exemption), even if there is no lease.
IMPORTANT NOTE 4: I worked with the NJ Division of Taxation to help them clarify rules related to this new law, especially as it relates to the transactions executed by a Real Estate Broker.
Here is the email I received directly from them. This information augments the information in this memo below.
Chris Whalen
Date: November 2, 2018
This is in response to your inquiry to the New Jersey Division of Taxation regarding the application of the New Jersey Sales and Use Tax Act (N.J.S.A. 54:32B-1 et seq.) to charges for the rental of transient accommodations.
Effective October 1, 2018, charges for the rental of transient accommodations are subject to Sales Tax (N.J.S.A. 54:32B-1 et seq.) and the State Occupancy Fee (N.J.S.A. 54:32D-1 et seq.). Depending on where the occupancy occurs, the transient accommodation may also be subject to various other state and municipal taxes, assessments, and fees.
A transient accommodation is a room, group of rooms, or other living or sleeping space for the lodging of occupants, including but not limited to residences or buildings used as residences. This definition includes rentals made through transient space marketplaces, as well as rentals that are made directly by the homeowner through classified listing sites, local newspaper ads, referrals from friends/family, or placing a sign on the home, etc.
In response to your specific inquiries:
1) What are the requirements for the real estate broker exclusion?
Charges for the rental of a transient accommodation are not subject to tax when the following criteria (the real estate broker exclusion) are satisfied:
- The sale is executed by a real estate broker licensed by the New Jersey Real Estate Commission;
- The keys or other means of physical entrance to the property are provided to the lessee at the location of the offsite real estate broker;
- The rental property is private residential property; and
- The lessor does not provide common hotel services such as maid service, room service, or linen-changing service.
[See N.J.S.A. 54:32B-2(ggg); see also Taxes Imposed on Charges for the Rental of Transient Accommodations, TB-81(R).]
2) What is required for a sale to be “executed by a real estate broker?”
A real estate broker is a person, firm, or corporation who, for a fee, commission, or other valuable consideration, or by reason of a promise or reasonable expectation thereof, does any of the following:
- Lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein; or
- Collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers; or
- Assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate; or
- Negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others, or any person who, for pecuniary gain or expectation of pecuniary gain conducts a public or private competitive sale of lands or any interest in lands.”
[N.J.S.A. 45:15-3.]
In order for the sale to be “executed by a real estate broker,” the broker must perform one or more of the functions described above.
3) Does it matter whether the rent check is written to the real estate broker or the property owner?
No. A rental transaction that satisfies all four requirements for the real estate broker exclusion is not taxable, regardless of the person to whom the check is written.
4) With reference to the example on the bottom of page 4 of TB-81(R), does it matter whether the rent check is written to the real estate broker or the property owner?
See response to question 3) above.
5) Is a rental transaction subject to tax when the customer obtains the property key (or digital access code) from a lockbox that is not located at the real estate broker’s office?
Yes. A rental transaction is subject to tax unless all four of the criteria listed in the response to question 1) are satisfied. Specifically, one of the four criteria requires that “the keys or other means of physical entrance to the property are provided to the lessee at the location of the offsite real estate broker.”Accordingly, a transaction does not qualify for the real estate broker exclusion when the lessee obtains the property keys from a lockbox that is not at the location of the real estate broker. The transaction is therefore subject to tax.
Starting October 1, 2018 NJ will impose taxes on short term property rentals.
This is a substantial change to NJ law. If you have short term real estate rentals I urge you to schedule a consultation with my team right away.
Do you have questions? Call me: 732-673-0510.
New Jersey has come up with the term “Transient Rentals” to describe the rental of Real Estate for a period of less than 90 days. This can include the rental of a single room, or an entire home. The term does not apply to Hotels, Motels, Dormitories, Campsites, Meeting Rooms, Hospitals or Nursing Homes. These facilities are already subject to their own taxes and fees.
The Transient Rental designation will affect all short term vacation rentals and homeowners who rent out rooms on a short term basis through services such as Airbnb. You will be subject to taxes on rentals whether you use a service such as Airbnb, which is termed as a Transient Space Marketplace, or rent the property yourself through a classified ad or sign on the street.
However, if you use a Transient Space Marketplace, they would be required to collect and pay all applicable taxes on your behalf.
If not, the individual property owner is required to register collect and remit all applicable taxes.
A Transient Space Marketplace does not charge the property owner for placing an ad on their website. They collect all rents and fees from the renter, and remits a net amount to the property owner after deducting its fees and expenses.
A service that charges an upfront fee for placing an ad for rental and does not collect the rent from the customer, is not considered a Transient Space Marketplace.
There are exceptions to the Transient Rental designation that would exempt a property owner from becoming subject to the additional taxes on rentals. These include:
- Realtor brokered transactions, where the tenant writes their check to the Realtor, not the landlord, and where the key is picked up at the realtor’s offsite location
- Rental to a non profit organization that has been granted an exemption from ST-50.
- Rental to the federal government or the State of New Jersey or any of their agencies or instrumentalities.
If your property rental is considered a Transient Rental, it will be subject to ALL of the following taxes:
Sales Tax:
The law imposes Sales Tax on charges for the rental of transient accommodations at the rate of 6.625 percent.
State Occupancy Fee:
The law imposes the State Occupancy Fee at the rate of 5 percent on charges for the rental of transient accommodations that are subject to Sales Tax. However, in municipalities where the rental of transient accommodations are already subject to a local tax on occupancies, the State Occupancy Fee is imposed at a lower rate (Atlantic City: 1 percent; Newark and Jersey City: 1 percent; and the Wildwoods: 3.15 percent).
Municipal Occupancy Tax:
The law authorizes any New Jersey municipality, other than Newark, Jersey City, Atlantic City, Wildwood, Wildwood Crest, and North Wildwood, to amend or adopt an ordinance that imposes the Municipal Occupancy Tax on charges for the rental of transient accommodations in that municipality, which can be up to 3 percent.
Meadowlands Regional Hotel Use Assessment:
Charges for the rental of transient accommodations located in the Meadowlands area are subject to the 3 percent Meadowlands Regional Hotel Use Assessment. The municipalities are: • Bergen County – Carlstadt, East Rutherford, Little Ferry, Lyndhurst, Moonachie, North Arlington, Ridgefield, Rutherford, South Hackensack, Teterboro; and • Hudson County – Jersey City, Kearny, North Bergen, Secaucus.
Atlantic City Promotion Fee:
The law authorizes Atlantic City to adopt or amend an ordinance that imposes a one dollar per day Atlantic City Promotion Fee on charges for the rental of transient accommodations in Atlantic City. The fee applies to each occupancy of a room or rooms, other than as a place of assembly. The fee is imposed on the seller of the transient accommodation occupancy. The fee is included in the sales price for both Sales Tax and Luxury Tax purposes if billed to the customer, regardless of whether or not it is separately stated. The Atlantic City Promotion Fee will apply to charges for the rental of transient accommodations on the first day of the first full month following 90 days after receipt of the ordinance by the State Treasurer.
Atlantic City Luxury Tax:
The law also authorizes Atlantic City to adopt or amend an ordinance that imposes the 9 percent Atlantic City Luxury Tax on charges for the rental of transient accommodations which occur for less than one year in Atlantic City. If the transient accommodation is for less than 90 days, Sales Tax is imposed at the rate of 3.625 percent. The Atlantic City Luxury Tax will apply to charges for the rental of transient accommodations on the first day of the first full month following 90 days after receipt of the ordinance by the State Treasurer. Note that a 1 percent State Occupancy Fee is additionally imposed on charges for transient accommodations in Atlantic City.
Sports and Entertainment Facility Tax – Millville:
The law authorizes Millville to adopt or amend an ordinance that imposes the 2 percent Sports and Entertainment Facility Tax on charges for the rental of transient accommodations which occur in Millville. Millville is currently the only municipality that imposes the Sports and Entertainment Facility Tax.
Cape May County Tourism Tax and Assessment:
The law authorizes Wildwood, Wildwood Crest, and North Wildwood to adopt or amend an ordinance that imposes the 2 percent Cape May County Tourism Tax and the 1.85 percent Cape May County Tourism Assessment on charges for the rental of transient accommodations which occur in Wildwood, Wildwood Crest, and North Wildwood.
Required Document Retention:
Transient space marketplaces are required to keep the following information for four years after the transaction occurs:
- The name of the person who provided the transient accommodation or hotel room;
- The name of the customer who purchased the transient accommodation or hotel room;
- The address, including any unit designation, of the transient accommodation or hotel room;
- The dates and nightly rates for which the consumer purchased the transient accommodation or hotel room;
- The municipal transient accommodation registration number, if applicable; • A statement as to whether such booking services will be provided in connection with (i) short-term rental of the entirety of such unit, (ii) short-term rental of part of such unit, but not the entirety of such unit, and/or (iii) short-term rental of the entirety of such unit, or part thereof, in which a non-short-term occupant will continue to occupy such unit for the duration of such short-term rental;
- The individualized name or number of each such advertisement or listing connected to such unit and the uniform resource locator (URL) for each such listing or advertisement, where applicable; and
- Such other information as the Division may require.
This new law is broad and sweeping and will impact many people that have short term rentals in the state of NJ. I urge you to contact me and my team to schedule a consultation to see how these laws will impact you.
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Chris Whalen, CPA
(732) 673-0510
79 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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