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Breakdown of the Cape May County, NJ Occupancy Tax Updates for Short-Term Rentals

Recently, Governor Phil Murphy signed into effect a new law that applies sales taxes and occupancy fees to any short-term rentals brokered through online marketspaces, referred to as ‘transient space marketplaces’ that will move into effect October 1, 2018.

What is the Transient Accommodations Tax?

Essentially, the law created a set of taxes to capture fees that normally would have been captured when a local real estate broker manages the rental.  With these marketplaces, the revenues have been circumvented by the booking services like HomeAway and AirBnB.

Additionally, the newly imposed tax allows for municipalities to add an additional tourism tax up to 3%.  However, no municipalities have yet alerted the state of NJ of their intent to implement one.

Table of what Transient Accommodations Tax adds per $100 in rent charged in the Cape May County, NJ.
Cities Sales Tax Occupancy Fees Tourism Assessment Tourism Tax Fees per $100
Cape May County, NJ
Ocean City, NJ
Sea Isle City, NJ
Avalon, NJ
Stone Harbor, NJ		 6.625% 5% 0% 0% $11.625
Cape May City, NJ 6.625% 5% 0% 0% $11.625
Wildwood, NJ
Wildwood Crest, NJ
North Wildwood, NJ		 6.625% 3.15% 1.85% 0% $11.625

Please note that although the individual fees differ in cities like Cape May City and the Wildwoods, all of the overall fees per $100 add up to $11.625 per $100 in rental fees collected.

 

What does the Transient Space Tax mean for owners or summer rentals down the Jersey Shore? 

If you currently work with a real estate agent to schedule and manage your rental properties, there is no new tax or fees.  A key line repeated in the announcement is:

“Charges for the rental of transient accommodations are not subject to the [New Tax or Fee] if:

  • The keys or other means of physical entrance to the property are provided to the lessee at the location of an offsite licensed real estate broker;
  • The occupancy occurs for at least 90 consecutive days (permanent resident exemption).”

So these fees only apply when a property owner chooses to use one of the transient space marketplace sites or publications to list and book their rentals.

Do property owners have to pay these new taxes and fees if a transient accommodations marketplace is used instead of a real estate agency?

That depends on how the rental is paid for:

  • If the marketplace charges a standard fee to the property owner to just list the property, and the property owner is paid directly by the renters, it is the property owner will be responsible for collecting and paying to correct taxes to Division of Revenue and Enterprise Services (DORES). This also required the property owner to register with DORES.
  • If the marketplace processes the payments from renters, takes their commission and then pays the property owner, then the marketplace will now be responsible for collecting and paying these taxes.

If you are using a transient space marketplace to rent your vacation rental, check the terms and conditions of the site or publication to confirm how renter transactions will be managed.

Where do I go to learn more about how the Transient Accommodations Tax might affect my summer rental?

You can read more about the Transient Accommodations Tax on the NJ State website here.

If you have more general questions about real estate and estate planning law in NJ, and how this new tax affects your plans, contact us.