New Jersey Assembly Proposes Tax on Short-Term Rentals

In response to the massive success of short-term rental programs like AirBnB, FlipKey and VRBO, New Jersey lawmakers proposed legislation to regulate and tax online vacation marketplaces by way of Assembly Bill 4441 (“A.B. 4441”), an “act concerning the licensing and regulation of space for accommodation of transient guests.” The bill passed the Assembly Tourism, Gaming and the Arts Committee on February 27, 2017 and has been referred to the Assembly Appropriations Committee, one of the final stops in the New Jersey legislative process, before the bill is voted on by the entire New Jersey Assembly.

If A.B. 4441 is enacted into law, municipal governments will have the authority to license and impose fees/taxes on landlords who host “transient guests,” which is defined as a “person who, for consideration uses, possesses, or has the right to use or possess any space for accommodation for a period of 90 consecutive days or less under a lease, concession, permit, right of access, license to use, or other agreement.” However, the bill specifically exempts “seasonal rentals,” which is defined as a “dwelling unit rented for a term of not more than 125 consecutive days for residential purposes by a person having a permanent residence elsewhere.” A.B. 4441 at § 3(a).  

Proponents of the bill contend that A.B. 4441 only targets individuals who use online vacation marketplaces outside of their intended purpose, and, in so doing, effectively avoids New Jersey’s extensive statutory laws regarding landlords and tenants. Opponents of A.B. 4441 believe that the bill unfairly attacks non-traditional renters who are unable to pay security deposits, such as college students or seasonal workers without a permanent residence.

Additionally, the landlord licensing requirement of A.B. 4441 may substantially impact homeowners who occasionally rent their homes for extra cash, as such uses may adversely impact homeowners insurance policies and reclassify certain properties for property tax purposes. As such, online vacation marketplace hosts and users should carefully follow the path of A.B. 4441 toward being enacted into law.

Peter Y. Fu is an attorney in Cooper Levenson’s Business & Tax and Cyber Risk Management practice groups. He concentrates his practice on sales and use tax, enterprise risk management, and commercial transactions. Peter is licensed to practice law in New Jersey and Florida. Peter may be reached at 609.572.7556 or via e-mail at pfu@cooperlevenson.com.

Jarad K. Stiles is an attorney in Cooper Levenson’s Business & Tax and Elder Law practice groups. He concentrates his practice on business succession planning, estate and asset protection planning, elder law planning,  and tax controversies. Jarad holds an LL.M. in Taxation. Jarad is licensed to practice law in New Jersey, New York, and the United States Tax Court. Jarad may be reached at 856.857.5594 or via e-mail at jstiles@cooperlevenson.com.

Michael L. Salad is an attorney in Cooper Levenson’s Business & Tax and Cyber Risk Management practice groups. He concentrates his practice on estate planning, business transactions, mergers and acquisitions, tax matters and cyber risk management. Michael holds an LL.M. in Estate Planning and Elder Law. Michael is licensed to practice law in New Jersey, Florida and the District of Columbia.  Michael may be reached at 609.572.7616 or via e-mail at msalad@cooperlevenson.com.

Date Published: May 30, 2017


Written by: Peter Fu, Jarad Stiles and Michael Salad