Ocean City, NJ Transient Accommodations Tax for Vacation Rentals

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

What is the Transient Accommodations Tax?

This new tax captures the monies that normally would have been paid through local real estate brokerages. With the rise of online booking services like VRBO or HomeAway, these taxes were circumvented.

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.

What does the Transient Space Tax mean for owners or summer rentals in Ocean City, NJ? 

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

That means that these fees are only applied when a property owner chooses to use one of the transient space marketplaces to list and book their rentals instead of a real estate agency.

Who collects these new taxes and fees if a transient accommodation marketplace site is used to book rentals in Ocean City?

That depends on how the rental is paid for:

• If the marketplace processes payments from the renters and pays out to the property owner after their commission, then the marketplace will be responsible for collecting and paying these taxes.
• If the marketplace charges an upfront fee to the property owner to list the property, and then the renter pays the property owner independently, then it is the property owner who will be responsible for collecting and paying to correct taxes to Division of Revenue and Enterprise Services (DORES). This method will also require the property owner to register with DORES.

If you are using a transient space marketplace to rent your vacation property in Ocean City, 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.