LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, Nos. 4814 and 4520

STATE OF NEW JERSEY

218th LEGISLATURE

 

DATED: MAY 29, 2019

 

 

SUMMARY

 

Synopsis:

Makes transient accommodation taxes and fees only applicable if rented through marketplace.

Type of Impact:

Annual State revenue loss to General Fund; potential annual revenue loss to local governments.

Agencies Affected:

Department of the Treasury; Local Governments.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2019 and Thereafter

 

State Revenue

Indeterminate Decrease

 

Local Revenue

Indeterminate Potential Decrease

 

 

 

 

·         The Office of Legislative Services (OLS) expects the bill to result in an indeterminate annual decrease in State revenues because the bill exempts rent charged for the occupancy of a room in a transient accommodation from State sales and use taxes and hotel and motel fees, provided the rental transaction is not executed through a transient space marketplace.  The OLS cannot quantify the overall impact of the bill on State and local revenues due to an absence of necessary data and the changing landscape of the transient accommodations market.

 

·         Local governments that impose applicable hotel taxes and fees authorized under current law and adopt an ordinance extending the local taxes and fees to transient accommodations, would potentially collect a lower amount of additional revenues under this bill because the taxes and fees would apply to a smaller group of taxable rentals than permitted under current law.

 

 

BILL DESCRIPTION

 

      The bill amends the definition of “transient accommodation” and “transient space marketplace” as they relate to the transient accommodation rental taxes imposed by P.L.2018, c.49. Pursuant to the bill, a transient accommodation rental will only be subject to taxes if the rental is obtained through a transient space marketplace. A transient space marketplace, online or otherwise, allows accommodations to be listed and provides a means for arranging the rental of the accommodation. The marketplaces are required to collect and remit the taxes on rentals on behalf of accommodation owners. No other persons or entities are required to collect the taxes, if the transient accommodations are not rented through a marketplace.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS expects the bill to result in an indeterminate annual decrease in State sales and use tax revenues and State hotel and motel fee revenues, and may potentially decrease local revenues, because the taxes and fees would only be imposed on rent charged for occupancy of a room in a transient accommodation that is obtained through a marketplace.  The OLS lacks sufficient data to quantify the magnitude of the revenue loss in the fiscal years following enactment.  Current law provides for limited exemptions from the State sales tax and hotel and motel occupancy fees for the occupancy of a room in a transient accommodation at furnished or unfurnished private residential properties that are provided through a real estate broker.  The bill further restricts the pool of taxable rentals by excluding rentals not consummated through a marketplace.

      Current law allows municipalities to impose, by ordinance, various hotel occupancy taxes and fees.  Municipalities that choose to impose these taxes and fees are required to adopt an amended ordinance in order to extend those taxes and fees to the rental of transient accommodations.  If this bill is enacted into law, municipalities that choose to extend local hotel taxes and fees to transient accommodations would collect a lower amount of additional revenues because the taxes and fees would apply to a smaller group of taxable rentals than permitted under current law.  In its most recent guidance regarding the taxes imposed on charges for the rental of transient accommodations, issued March 1, 2019, the Division of Taxation noted that it had not received any amended municipal ordinances extending local hotel occupancy taxes and fees to transient accommodations.

      During the Fiscal Year 2020 budget process, the Department of the Treasury indicated that the State sales tax applied to transient accommodations yielded $2.3 million through the end of January 2019 and is expected to generate $8 million in total during Fiscal Year 2019.  The hotel and motel occupancy fee yielded approximately $1 million on transient accommodations during that same time period.  The OLS notes P.L.2018, c.49 did not become operative until October 1, 2018, and therefore State taxes and fees were not imposed on the rents charged for the occupancy of transient accommodations during the summer, which is the peak of New Jersey’s tourism season.  The extension of State taxes and fees to transient accommodations is anticipated to generate higher revenues in Fiscal Year 2020 as P.L.2018, c.49 will have been in effect for the entire fiscal year.


 

Section:

Local Government

Analyst:

Joseph A. Pezzulo

Associate Research Analyst

Approved:

Frank W. Haines III

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).