New Jersey vacation rental tax guide

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NOTE: The outbreak of COVID-19 (caused by the coronavirus) may have impacted vacation rental tax filing due dates in New Jersey. Please consult your local tax authority for specific details. For more information, visit our ongoing coverage of the virus and its impact on sales tax compliance.

Airbnb, HomeAway, and VRBO have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Atlantic City and Jersey Shore, the Garden State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.

But new income opportunities bring new tax implications. Like hotel, motel, and B&B stays, short-term rentals in New Jersey are subject to tax. Tax authorities expect short-term vacation rental hosts to collect short-term rental taxes from their guests and remit them to the proper authorities.

Failure to comply with state and local tax laws can result in fines and interest penalties. These may not catch up with homeowners in the short term, but the sharing economy is increasingly being placed under the proverbial microscope. It’s recommended that you address compliance before tax authorities address it for you.

Avalara has put together this guide to help you comply with New Jersey short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

Disclaimer: No short-term vacation rental tax guide is a substitute for professional tax advice. Consider it 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.

Short-term Rental Tax Basics

When you start operating a short-term rental, you may not have experience with lodging taxes, but you are probably familiar with income tax. It’s important to understand the difference between the two.

Income taxes are reported and paid annually to the federal and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.

In contrast, a lodging tax on a short-term rental is a percentage of the cost of your guest’s stay that is added to the price of the bill. The guest pays the tax, but you are responsible for collecting the tax and paying it to the proper tax authority.

Taxes on short-term rentals can be known as transient tax, lodging tax, occupancy tax, sales tax, bed tax, tourist tax, and more. Usually, the total tax rate you charge your guest is made up of many different taxes required by the state or local entities such as counties, cities, and towns.

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

In New Jersey, short-term rentals of fewer than 90 days are referred to as “transient accommodations,” 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.” This definition includes rentals made through “transient space marketplaces” such as Airbnb, HomeAway, and VRBO, as well as rentals that are facilitated directly by the homeowner.

However, in New Jersey, transient accommodations do not include private residential property where no maid service, room service, linen-changing service, or other common hotel services are provided and the rental transaction is executed by a licensed real estate broker who provides keys to the renter. These types of rentals are not subject to short-term rental taxes.

It is important to note that the definition of short-term rentals may vary from location to location. Check with your local tax authority for the most up-to-date information.

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

If you are renting out a room, apartment, house, or other dwelling for fewer than 90 days at a time and accepting direct payment from guests, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to New Jersey authorities. You may be the property owner, a renter subletting a room, a third-party property management firm, or other party.

However, if a short-term rental marketplace such as Airbnb, HomeAway, or VRBO is collecting payment for your short-term rental for you, the marketplace is responsible for collection and payment of all lodging taxes for your rental.

You have no lodging tax obligation if your rental is a private residential property, you do not provide hotel services to guests, and a licensed real estate agent is handling the rental for you and providing keys to guests.

Location is key to compliance

The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address will determine which tax jurisdictions you are required to report to, which taxes you need to collect, and your tax rates.

You can use our lodging tax lookup tool to get a rate report specific to your New Jersey address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, number of required registrations, 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.

Registering with State Authorities

Before you can begin collecting lodging on your short-term rental in New Jersey, you are legally required to register with the New Jersey Department of Revenue at least 15 days before you start business. When you register, you will receive instructions on filing your lodging taxes.

You do not need to register to collect lodging tax on your short-term rental if all your payments go through a short-term rental marketplace or if your private residential property rental goes through a licensed real estate agent who provides keys to guests and you do not provide hotel services.

You may also be required to register with local tax authorities. Be sure to check with them for details.

Do I need to form an LLC?

In New Jersey, you do not need to form an LLC in order to register with tax authorities.

Business registrations

Along with tax obligations, short-term rental operators may be required to apply for short-term rental permits, business registrations and more. Check with your local authorities for the rules that apply to you.

Short-term rental regulations

Short-term rental operators in New Jersey should be aware of regulations that apply to them, including local rules covering:

  • Legality

  • Zoning

  • Advertising

  • Neighborhood notification

  • Building and housing standards

Homeowner Associations (HOA) located in New Jersey may also have specific rules regarding vacation rentals. As a member, it’s your responsibility to be aware of the association’s policy. It’s important to review this information to understand any restrictions or limitations on short-term vacation rentals.

Other rules and regulations associated with leases/subletting or condo/co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.

Collecting Short-term Rental Tax

Once you’re registered with tax authorities, you are ready to start collecting rental tax, 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 short-term rental, depending on your location. These can include any of the following taxes listed below. It's important to note that exact tax requirements for your short-term rental depend on its exact address.

Tax Name Filed and Remitted To
Sales Tax New Jersey Department of Revenue
Meadowlands Regional Hotel Use Assessment New Jersey Department of Revenue
State Occupancy Tax New Jersey Department of Revenue
Sports and Entertainment Facility Tax (Millville) New Jersey Department of Revenue
Atlantic City Luxury Tax New Jersey Department of Revenue
Atlantic City Promotion Fee New Jersey Department of Revenue
Cape May County Tourism Tax and Assessment New Jersey Department of Revenue
Municipal Occupancy Tax New Jersey Department of Revenue
Hotel Occupancy Tax
Local Tax Authority

Tax Rates

Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s important to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues. State and local tax authorities should have the latest rates posted. You can also use our lodging tax lookup tool to find the right rates.

What charges are taxable?

In New Jersey, anything that the host requires the guest to pay in order to use the accommodation is considered part of the rental fee. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc., whether they are stated separately or rolled in to the overall price of the accommodation. Basically, if it is a non-negotiable, nonrefundable fee that is mandatory in order to use the rental, it is generally taxable.

Fees that are refundable, such as damage deposits, are generally not subject to lodging taxes — even if the host keeps the deposit, because there was no accommodation used. The same is true for optional fees. For example, if you are charging guests fees for performing optional laundry services that they choose to use, or a fee for arranging dry cleaning for them, these most likely are not subject to lodging taxes.

What happens when my short-term rental platform (such as Airbnb, HomeAway, or VRBO) collects taxes for me?

Before collecting any short-term rental tax from your guests, you need to be aware of whether any taxes have already been collected for you. Some vacation rental platforms, including Airbnb, HomeAway, and VRBO, collect New Jersey short-term rental taxes for you when the listing is booked. However, platforms do not collect taxes in all locations, and they may not collect all the state and local taxes you owe.

If you rent your home through an online platform, be sure to identify which taxes (state, local, or both) are being collected and remitted on your behalf to avoid mistakenly collecting tax twice or failing to collect at all.

Although all short-term rental marketplaces are required to collect and remit lodging taxes on behalf of hosts if the marketplace accepts rental payments, at the time of this guide’s publication, the only tax Airbnb collects for New Jersey hosts is municipal occupancy tax in Jersey City. HomeAway/VRBO collect all state sales and hotel occupancy fees, as well as state-administered city/county lodging taxes.

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 of 90 days or more is exempt from short-term lodging taxes.

In New Jersey, exempt organizations registered with the New Jersey Division of Taxation, 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, the State Occupancy Fee, and, if applicable, the Municipal Occupancy Tax, as long as the accommodation is paid for directly by the agency. In addition, certain exemptions are granted to qualified foreign diplomatic and consular personnel who reside in the United States.

Filing Short-term Rental Tax Returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the New Jersey Department of Revenue and local tax jurisdictions. In New Jersey, you can file short-term rental tax returns online. In order to file, you will need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due, usually via check or electronic transfer. The New Jersey Department of Revenue and Finance allows credit card payments, but you may be charged convenience fees for this type of payment.

Take the time to double check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.

When do I need to file my returns?

You will be assigned a filing frequency and due dates when you register with the tax authority. At the state level, annual, quarterly, and monthly due dates are as follows. We recommend contacting your local tax authority if you have any questions about local tax due dates.

Filing Frequency Due Date
Annually Due by May 1 each year
Quarterly Due by the 20th of the month following the close of the filing period
Monthly Due by the 20th of the month following the close of the filing period

Due dates for local tax returns may be different from the state’s. We recommend contacting your local tax authority if you have any questions.

I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the New Jersey Taxation and Revenue Department?

Yes. Short-term rental operators registered with the New Jersey Taxation and Revenue Department are required to file returns each assigned filing period, regardless of whether you had any short-term rental income or any short-term rental taxes were collected. 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 short-term rentals through a marketplace like Airbnb or directly to the consumer, 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 not in compliance with local tax laws. Failure to register with tax authorities and file short-term rental tax returns in New Jersey on time may result in late fees, interest payments, and in extreme cases, legal action.

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

If you’re already operating a short-term rental but are not collecting short-term rental 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.

Short-term rental 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 Department of the Treasure, 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 transient occupancy tax filing?

Yes. Many short-term rental hosts in New Jersey file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.

The Vacation Rental Property Owner

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