New Jersey vacation rental tax guide

With a bounty of popular destinations including Atlantic City and the Jersey Shore, the Garden State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STRs in New Jersey are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you.

Avalara MyLodgeTax put together this guide to help you comply with New Jersey lodging tax laws at the state level. Local jurisdictions such as cities or counties may have their own lodging tax rules. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with New Jersey tax laws.

Lodging tax basics

Lodging tax is calculated as a percentage of the cost of your guest’s stay and is added to the price on the bill. The guest pays the tax, but the operator is responsible for collecting and paying it to the proper tax authority.

What's the definition of “short-term rental” in New Jersey?

In New Jersey, “transient accommodation,” defined as a room, group of rooms, or other living or sleeping space for the lodging of occupants (including but not limited to residences or buildings used as residences) that is obtained through a transient space marketplace or is a professionally managed unit, with leases of less than 90 consecutive days, are subject to lodging taxes.

Who’s required to collect and file lodging taxes on short-term rentals in New Jersey?

If you rent out a room, apartment, house, or other dwelling for fewer than 90 days at a time, you may be responsible for collecting, filing, and remitting lodging taxes to New Jersey authorities.

You have no lodging tax obligation if you:

• Provide STRs through a marketplace through which the guest makes payment, in which case the marketplace is responsible for the tax.
• Rent out a private residential property for short terms and a licensed real estate agent handles your rental operations.
• Have up to two rental units and rent your STRs directly to guests rather than via intermediaries such as Vrbo or Airbnb.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your New Jersey rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay. It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Local short-term rental regulations

STR operators in New Jersey should be aware of the local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registration
• Zoning
• Advertising
• Neighborhood notification
• Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Registering with tax authorities

Before you can begin collecting taxes on your STR in New Jersey, you’re legally required to register with the New Jersey Division of Taxation at least 15 days before you start business. You can register online. Depending on your jurisdiction, you may be required to register with your local tax authority and file local lodging tax returns in addition to state registration and filing.

Collecting lodging taxes

Once you’ve registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which taxes apply to New Jersey short-term rentals?

In New Jersey, a number of different lodging taxes may apply to your STR, depending on your location. These can include:

Tax rates

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your New Jersey address.

What charges are taxable?

In New Jersey, anything related to occupancy is taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. However, other components of the rental price, such as meals, tickets, admissions, transportation, etc., are not subject to lodging taxes.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me? 

In New Jersey, “transient space marketplaces” such as Airbnb and Vrbo that facilitate payment for STRs are responsible for collecting state-administered lodging taxes for all their listings. Marketplaces may collect some local lodging taxes. If applicable lodging taxes aren’t being collected for you, you’re responsible for collecting and remitting them to tax authorities.

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in New Jersey. For example, a guest who rents for a long term rather than a short term is exempt from lodging taxes.

In New Jersey, state and federal agencies, the United Nations, and any other international organization of which the United States is a member are exempt from paying Sales Tax, State Occupancy Fees, and, if applicable, Municipal Occupancy Taxes, as long as the accommodation is paid for directly by the agency. Organizations holding state Exempt Organization Certificates may be exempt from paying state sales tax.

In addition, certain exemptions are granted to qualified foreign diplomatic and consular personnel who reside in the United States. Spaces rented for the purpose of assembly (meetings, seminars, weddings, etc.) are exempt from lodging taxes.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the New Jersey Division of Taxation. In New Jersey, you can file returns and pay tax online. The New Jersey Division of Taxation allows credit card payments, but you may be charged convenience fees for this type of payment.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the New Jersey Division of Taxation, due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the New Jersey Division of Taxation?

Yes. STR operators registered with the New Jersey Division of Taxation are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses violating tax laws. Failure to register with tax authorities and file lodging tax returns in New Jersey on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without collecting lodging tax. What options do I have?

If you’re already operating an STR but not collecting lodging taxes, you may be in violation of New Jersey tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.

STR hosts in New Jersey may be able to take advantage of a managed audit. A managed audit offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the New Jersey Division of Taxation. Managed audits are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR operators in New Jersey file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.