NJ Sales & Occupancy Tax Information
Effective October 1, 2018, New Jersey passed a new law stating that vacation rentals not booked through physical real estate offices are subject to the State Sales Tax of 6.625% and the State Occupancy Fee of 5%, for a total of 11.625% of the gross rent charged to the tenant. This includes rentals on Long Beach Island.
What does this new law mean if you are a homeowner who rents their home?
Scenario A: If you list your property on an online “booking” website like VRBO/HomeAway, AirBnB, FlipKey, etc. where the marketplace collects all the rent from the tenants, you do not need to register with the state. However, the marketplace is still required to register, collect the tax from the tenants and remit it to the state. In addition to the marketplace’s service fee, the tenants will have to pay 11.625% more for the rental if the owner is to collect the same rent as before the tax change. The marketplace will deduct the tax and their commission from whatever they receive from the tenant, before paying the owner.
Scenario B: If you advertise your rental property by word of mouth, social networks, the SandPaper or classified listings website like VRLBI.com or CraigsList and collect rent directly from the tenants, you must register with the state, charge the tenants the 11.625% tax, and remit the tax to the state.
What does this new law mean to the tenant?
If you‘re a tenant booking and paying for a rental through an online “booking” website instead of through a NJ licensed real estate brokerage, you may be paying 11.625% more for your rental, to cover the new taxes and fees the owner is required to pay.
****There is a solution to this problem to legally avoid paying the 11.625% tax as a homeowner and a tenant****
Vacation rentals executed by NJ licensed real estate brokers who manage the funds and the keys or codes required to access the property are exempt from the new law.
For rentals that owners secure themselves – through word of mouth, social networks, the SandPaper or classified listings website like VRLBI.com or CraigsList, let Mancini Realty handle the lease, the funds and the keys, and we’ll offer you a discounted rate of 8% for our commission.
Call us today for more information 609.492.2256