If you look to rent a place on the popular Jersey Shore through Airbnb and VRLBI.com, New Jersey Governor Phil Murphy says you will have to pay a 5% tax on top of their rental charge. Visitors can avoid paying this extra tax if they rent through a real estate agent starting October 1, 2018.
According to the newest tax law from Governor Murphy, the state will now force owners who put their homes, or rooms, up for short-term rent to pay New Jersey’s 6.625% sales tax and 5% occupancy tax plus any municipal taxes, which can be up to 3%.
This is one of the governor’s attempts to capture additional real estate revenue within the state, which boasts the highest real estate taxes in the country. New Jersey is also now taxing all online digital transactions. It’s a bid by government agencies to capture transactional revenues it has lost with the loss of the traditional retail brick-and-mortar businesses.
This new tax sits well with New Jersey’s hotel and motel operators, who are already collecting occupancy and sales taxes. New Jersey is not alone in this approach to revenue: currently there are 44 states that collect occupancy taxes from an Airbnb customer. The only way an Airbnb customer can avoid the tax is if they rent their place through a real estate agent. The law isn’t finalized yet as the New Jersey Division of Taxation tries to finalize the rules to ensure the tax would be applied specifically to online sites like Airbnb. And even if someone rents their place by word of mouth, tax would still be collected since federal rules prevent state and local governments from discriminating against electronic commerce.
This all translates into some real bucks. In the case of a month-long rental for $5,000, the total amount with tax would come in at $5,562.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.