Airbnb, Fantasy Sports Tax Bills Move to New Jersey Senate

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By John Herzfeld

Large-scale commercial fantasy sports activities and short-term accommodations booked with Airbnb Inc. and other online services would be taxed under bills approved by the New Jersey Assembly.

The bills must be taken up in the Senate, where a committee version of the fantasy sports bill differs from the Assembly bill and where no companion bill to the Airbnb legislation has been introduced.

The fantasy sports bill ( A. 3532) passed the Assembly May 22 by a 56-15 vote. Assembly sponsors said it would provide needed oversight to protect consumers from unfair business practices.

Covered by the bill are large-scale commercial fantasy sports activities like those run by DraftKings Inc. and FanDuel Inc., defined as fantasy or simulated activities or contests with an entry fee in which a participant owns or manages an imaginary team and competes against other participants or a target score for a predetermined prize. Small-scale season-long fantasy sports activities by family and friends aren’t covered.

Permits would be issued by a state agency to fantasy sport operators, as well as casino licensees and licensed racetracks that partner with fantasy sports providers. Fantasy sports operations would have to have at least one server based in Atlantic City, N.J.

A quarterly fee of 10.5 percent of gross revenue would be charged by the state under the Assembly bill, raised by committee amendment from 9.25 percent. The Senate bill, passed in committee last June, still has the 9.25 percent rate, to be collected annually.

$6.6M in Revenue

The Assembly bill would raise $6.6 million in revenue, versus $5.8 million for the Senate bill, according to fiscal estimates by each house.

People under 18 would be barred from participating in fantasy sports operations, as would people with financial interests in the industry. Tampering or other actions that affect odds or payouts would be penalized with fines, from $25,000 per person to $100,000 for groups.

“The fantasy sports industry is a growing market year after year,” said Assemblyman Vince Mazzeo (D) in a statement. “The time is right for New Jersey to enter the fold with regulations aimed at providing strong consumer protections for our residents.”

The bill, he said, “promotes a positive business environment for fantasy sports operators and their thousands of New Jersey customers.”

Last year, six states passed fantasy sports legislation that added fees or taxes that operators must pay. DraftKings and FanDuel won permits to operate in the neighboring New York market last fall after the state temporarily shut them down while it worked out formal regulations.

Airbnb Bill

The Assembly also passed a bill ( A. 4587) May 22 to tax “transient accommodations,” or residences used as temporary lodging, on the same basis as hotels and motels.

Accommodations booked with Airbnb and other online services would be subject to the state sales and use tax—now 6.875 percent but dropping to 6.625 percent in 2018—as well as a 5 percent hotel and motel occupancy fee and numerous taxes and fees set by municipalities.

The bill, passed 45-29, would have Airbnb and other online platforms collect the taxes and forward them to the state and municipalities.

Owners of short-term accommodations are responsible for sales tax collection in 25 states, whereas 15 states impose this collection obligation on third-party companies that facilitate the reservations, such as Airbnb.

Level Playing Field

Sponsors said the bill is meant to level the playing field between the hospitality industry and the online booking platforms.

“We can’t allow rules to apply to one business but not another when they essentially provide the same service,” Assemblywoman Valerie Vainieri Huttle (D) said in a statement. “Accommodations booked through sites like Airbnb are used like hotel rooms. They should be subject to the same obligation.”

A spokesman for Airbnb said the company welcomed the bill.

“Today’s vote was a major step forward and will enable Airbnb hosts to pay their fair share in the Garden State,” Josh Meltzer, head of Northeast Public Policy, said in a May 24 statement. The company, he said, “looks forward to collecting millions of dollars in tax revenue on behalf of the Airbnb community in New Jersey.”

6,100 Hosts in 2016

The Assembly said in an analysis of the bill that it lacks enough information to estimate the revenue impact of the bill, but pointed to an Airbnb statement in February that it had 6,100 active hosts in New Jersey, earning more than $50 million in 2016.

That would translate to some $6 million in revenue, the analysis said, calling that figure only a part of the anticipated total.

But a greater portion of the state’s tourism lodging industry includes furnished or unfurnished private residential properties provided through a real estate broker, which aren’t covered by the bill, the analysis said.

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the fantasy sports bill is at http://src.bna.com/pb5.

Text of the hotel tax bill is at http://src.bna.com/pco.

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