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For Jersey Shore rentals facing new ‘Airbnb tax,' partial relief may be on the way

A New Jersey Senate committee moved forward a bill that would exempt homeowners from paying taxes on rentals if they deal directly with a client instead of using a website such as Airbnb or Vrbo. Some homeowners have blamed the new tax for depleting their summer bookings.

Homes in Ocean City.
Homes in Ocean City.Read moreCOLIN KERRIGAN / Staff Photographer

New Jersey Shore homeowners and renters took a step closer Monday to receiving some relief from the state’s new tax on short-term property rentals.

In reaction to the tax on Airbnb bookings and other rentals, a Senate committee voted to move forward a bill that would exempt homeowners from paying taxes on rentals if they deal directly with a client to rent their homes.

Since the tax, aimed at home-sharing marketplace Airbnb, took effect in October, some Shore homeowners have complained about its impact after they raised prices to cover the tax.

“I’m really having a hard time this year because of this tax,” Duane Watlington, who owns a home on Long Beach Island, told senators. “In the past, we’ve always been fully booked by now.”

The bill approved by the Community and Urban Affairs Committee would still charge taxes on Shore rentals booked via marketplaces, such as Airbnb, Vrbo, and other websites. But it would offer some help to homeowners such as Watlington, who is a founding member of the NJ Shore Rentals Coalition. The group formed last year to push for repealing or changing the tax.

Many states, including Pennsylvania, have taxes on Airbnb and similar services. New Jersey’s levy applies the 6.625 percent state sales tax and 5 percent occupancy fee to short-term rentals. It is projected to raise $8 million by the end of the fiscal year in June.

Rentals arranged through licensed real estate brokers — as are the case for many Shore rentals — have been exempt from the “Airbnb tax" since it took effect last year. That carve-out angered homeowners who do not use licensed brokers to rent out their properties.

While the Senate bill would not exempt all Shore rentals, some homeowners have said they have long-standing relationships with some renters who return to their homes every summer, and don’t complete every transaction through a website or other advertising platform. The bill would exempt those rentals, although it’s unclear how many property owners might be covered.

“These people are looking to allow for the correction to occur so that they can rent to individuals outside of internet transactions through personal bookings without the imposition of the tax,” Tony Pizzutillo, a lobbyist hired by the NJ Shore Rentals Coalition, told the Senate committee.

Airbnb, which supported the bill creating the tax last year, opposes the proposed change. Josh Meltzer, who works on public policy issues for the company, wrote in submitted testimony that it would affect rentals in newspaper and magazine classifieds in addition to websites, because they would also classify as rental marketplaces.

“This disadvantage is not only bad for Airbnb and our hosts — it would also reduce tax revenue by incentivizing operators to change their business model to elude the tax requirement and cause confusion for consumers, who could see varying prices for the same accommodation depending on whether it is offered on or off a platform,” Meltzer wrote.

Watlington warned lawmakers that families may not vacation at the Shore due to the tax — or they may have less money to spend at shops and restaurants while there.

“We’re the canaries in the coal mine here for our Jersey shoreline and the tourism at the Shore this summer,” he said.

The bill will now go to the full Senate. A similar bill is pending in the Assembly.