New Jersey Bill Taxing Airbnb Bookings Sent to Governor

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By John Herzfeld

Short-term accommodations booked with Airbnb Inc. and other online hospitality services would be taxed under a bill approved by New Jersey’s Democratic-controlled Legislature.

The bill ( A. 4587, S. 2574) would tax “transient accommodations,” or residences used as temporary lodging, on the same basis as hotels and motels. It passed the Senate June 19 by a 25-13 vote and was approved by the Assembly May 22. It has the endorsement of Airbnb, which says its 6,100 active hosts in New Jersey earned more than $50 million in 2016.

A representative of the New Jersey Hotel and Lodging Association, which backed the bill and worked with legislators on its language, told Bloomberg BNA June 20 that the group hopes Gov. Chris Christie (R) will sign it.

“I know the governor is opposed to new tax bills, but we hope he’ll see that this is an extension of an existing tax to people who should be be paying it, not a new tax,” he said. “But we have no indication of what the governor intends to do.”

A spokesman for Christie told Bloomberg BNA in a June 20 email that the governor’s office doesn’t comment on pending legislation.

According to Bloomberg BNA’s 2017 Survey of State Tax Departments, 15 states impose tax collection obligations on Airbnb and other third-party companies that facilitate reservations for short-term accommodations. Owners of short-term accommodations are responsible for sales tax collection in 25 states.

Few States Have Legislation

New Jersey, if Christie signs the bill, would be one of the few states to use legislation to apply tax collection and remittance requirements to Airbnb and other third-party platforms, said Troy Flanagan, a lobbyist for the American Hotel & Lodging Association.

The vast majority of the states that collect from Airbnb have reached “sweetheart” voluntary agreements, most of which haven’t been made public, he told Bloomberg BNA June 20. Agreements that have been disclosed don’t require Airbnb to identify the hosts, shielding the data from audits, he said.

The New Jersey bill “goes a long way in the right direction,” but collecting taxes is “only the lowest rung on the ladder,” Flanagan said.

Airbnb properties should be subjected to the same host of regulatory requirements as hotels, he said, arguing that many of the listings aren’t offered by “mom and pop home sharers who want to rent out an apartment from time to time” but by investors with multiple properties trying to run year-round accommodations businesses.

A spokesman for Airbnb didn’t immediately respond June 20 to a request for comment on the New Jersey bill.

Revenue Analysis

An Assembly analysis said that it couldn’t provide a revenue estimate for the bill, but found that Airbnb bookings alone might have yielded $6 million in 2016. Accommodations booked through Airbnb and other sites constitute only a portion of the short-term rentals that would be considered taxable transient accommodations under the bill, the analysis said.

Under the bill, transient accommodations 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. They would also be subject to numerous taxes and fees set by local governments.

Furnished or unfurnished private residential properties provided through a real estate broker, which make up a greater portion of the state’s residential short-term bookings, are exempt from the bill.

Backers of the bill maintain that allowing short-term accommodations rented through Airbnb and other third-party sites to skirt tax obligations hurts the hospitality industry and deprives municipalities of needed revenue.

“New Jersey welcomes innovative business models like Airbnb’s, provided these emerging businesses play by the same rules as their competitors in the market,” said Assemblyman Tom Giblin (D) in a statement on the Senate vote. “By setting clear parameters regarding taxation on short-term rentals, the state can ensure that everyone in the hospitality industry has a fair shot.”

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 A.4587 is at http://src.bna.com/pco.

The fiscal analysis is at http://src.bna.com/p1T.

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