ASSEMBLY BUDGET COMMITTEE
ASSEMBLY, No. 4587
with committee amendments
STATE OF NEW JERSEY
DATED: MAY 10, 2017
The Assembly Budget Committee reports favorably Assembly Bill No. 4587 (1R), with committee amendments.
As amended, this bill subjects charges of rent for providing transient accommodations in this State to the State sales and use tax, and the State hotel and motel occupancy fee, and authorizes municipalities to impose the hotel occupancy fee, Atlantic City luxury tax, Atlantic City promotion fee, Cape May County tourism sales tax, Cape May County tourism assessment, municipal occupancy tax, sports and entertainment facility tax, and Meadowlands regional hotel use assessment, where applicable. A transient accommodation is defined in the bill 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. However, the bill exempts from taxation furnished or unfurnished properties which are made available by the lessor and where the keys to the property, regardless whether a physical key or keyless locking mechanism is used to access the property, are provided to the lessee at the location of an offsite real estate broker licensed by the New Jersey Real Estate Commission. Additionally, the bill exempts a campsite, cabin, lean-to, or other similar residential facility of a campground or an adult or youth camp.
The bill permits the Director of the Division of Taxation in the Department of the Treasury or the chief fiscal officer of a municipality (when applicable) to enter into an agreement with the owner or operator of a transient space marketplace for the purpose of collecting the taxes and fees imposed and authorized under the bill. A transient space marketplace allows transient accommodations or hotel rooms to be advertised or listed through an online marketplace and provides a means for a customer to arrange for the occupancy of the transient accommodation or hotel room in exchange for consideration directly through the online marketplace.
Under current law, the State imposes the sales and use tax (at a rate of 6.875% on and after January 1, 2017 but before January 1, 2018, and 6.625% on and after January 1, 2018) and the hotel and motel occupancy fee (at a rate of 5%) on the rent for each occupancy of a room or rooms in a hotel in this State. Further, current law authorizes municipalities to impose various taxes and fees, where applicable, on the rent for each occupancy of a room or rooms in a hotel in those municipalities. Current law does not impose taxes and fees on short-term rentals (transient accommodations) for occupancies that occur in other types of real property, such as the rental of a spare bedroom in an apartment or the lease of living or sleeping spaces in a single-family house.
In addition to imposing the State sales and use tax and the State hotel and motel occupancy fee on transient accommodations, the bill authorizes municipalities to impose the following taxes and fees on transient accommodations where applicable:
• Hotel Occupancy Tax (C.40:48E-1 et seq.);
• Atlantic City Luxury Tax (C.40:48-8.15 et seq.);
• Atlantic City Promotion Fee (C.40:48-8.45 et seq.);
• Cape May County Tourism Sales Tax (C.40:54D-1 et seq.);
• Cape May County Tourism Assessment (C.40:54D-1 et seq.);
• Municipal Occupancy Tax (C.40:48F-1 et seq.);
• Sports and Entertainment Facility Tax (C.34:1B-190 et seq.); and
• Meadowlands Regional Hotel Use Assessment (C.5:10A-82 et seq.).
The bill treats permanent residents and charitable, non-profit organizations that lease or rent transient accommodations consistent with how those individuals and organizations are treated for purposes of hotel and motel occupancies. The bill provides that charges of rent for providing transient accommodations to a permanent resident are not subject to tax or fee, and provides that charitable, non-profit organizations (that have been granted tax immunity authorization) are exempt from tax and fee collection responsibilities when providing transient accommodations in furtherance of the purposes for which it was organized.
The proposed committee amendments update the definition of transient accommodation to exclude a campsite, cabin, lean-to, or other similar residential facility of a campground or an adult youth camp. The amendments also clarify the use of keyless locking mechanisms to access furnished or unfurnished private residential property provided through a real estate broker.
The amendments eliminate a provision of the bill that permitted an officer of any city of the fourth class in this State to enter into an agreement with a transient space marketplace to collect the Atlantic City Luxury Tax (C.40:48-8.15 et seq.) on behalf of the person engaged in the business of providing transient accommodations or hotel rooms through the marketplace. The amendments include a new section which permits the Director of the Division of Taxation to enter into an agreement with a transient space marketplace to collect the Atlantic City Luxury Tax on behalf of the person engaged in the business of providing transient accommodations or hotel rooms through the marketplace.
The amendments make technical updates to a section of the "Sales and Use Tax Act" (P.L.1966, c.30, C.54:32B-1 et seq.) that is being amended by the bill to reflect underlying statutory changes enacted pursuant to P.L.2017, c.27. P.L.2017, c.27 eliminates the sales and use tax on transportation services originating in New Jersey and provided by a limousine operator and reduces liability insurance requirements for limousine service when a limousine is not transporting a passenger.
As amended, the Office of Legislative Services (OLS) expects Assembly Bill No. 4587 (1R) to produce a recurring annual increase in State sales and use tax and State hotel and motel fee revenue, but lacks sufficient information to quantify the magnitude of the gain in fiscal years following enactment. Additionally, those local governments which enact ordinances to impose the local taxes and fees authorized pursuant to the bill are anticipated to receive recurring annual increases in revenue.
Data concerning rental properties which would qualify as a transient accommodation pursuant to the provisions of the bill and the rates being charged for access to those transient accommodations are unknown at this time. Thus, the OLS cannot produce a quantitative estimate regarding the overall impact of the bill on State and local revenues.
Nevertheless, as an example, publicly available information (NJBIZ, 2/17/2017) references an announcement made by the online marketplace and hospitality service, Airbnb, which stated that 6,100 active hosts in New Jersey earned over $50 million in 2016. Had these transient accommodations been taxable, combined revenue from the State sales and use tax and the State hotel and motel occupancy fee would have been up to approximately $6 million. The OLS notes that New Jerseyans who offer their transient accommodations through Airbnb and other online marketplaces represent but a portion of those short-term rentals which would be considered taxable transient accommodations pursuant to the bill. Thus, the $6 million in revenue attributable to taxing transient accommodations listed with Airbnb likely represents a lower amount than total anticipated revenues.
However, a greater portion of the State’s tourism lodging industry includes those furnished or unfurnished private residential properties provided through a real estate broker, which are not included in the definition of transient accommodation pursuant to the bill and are not subject to taxation. The OLS is unable to determine the number of rental properties which would otherwise be considered transient accommodations pursuant to the bill, absent being facilitated through a real estate broker. Additionally, the OLS cannot predict the behavior of those persons in the business of providing transient accommodations who may choose to list with a real estate broker as part of certain tax planning measures.