US: The Jersey Shore has become America’s latest national battleground over regulating and taxing the online sharing economy after adopting the so-called “Airbnb tax” in October.
The “Airbnb tax” is a 11.6 per cent surcharge on short-term rentals, which is making increasing numbers of holidaymakers anxious about their summer travel plans.
The fallout over the tax has catapulted New Jersey into a wider debate as states and communities get to grips grapple with the rapid growth of the online home-sharing economy. A patchwork framework of local ordinances has failed to keep pace with the rapid rise of Airbnb, which was valued at $31 billion two years ago.
Now, the popularity of Airbnb has prompted lawmakers to implement updated rules and regulations on short-term rentals as they seek to find ways to make the most of the boom in revenue.
Likewise, Massachusetts recently passed a statewide tax on short-term rentals aimed at Airbnb and platforms of the same ilk, while a proposal to increase the sales tax on rentals has also just been introduced in Colorado.
In New York City, Airbnb and local officials have been at loggerheads over efforts to regulate the industry further. A federal judge blocked a law in January that would have forced Airbnb to provide detailed information about listings and hosts, and the city also filed a lawsuit against a group of real estate brokers, accusing them of using Airbnb to illegally rent out apartments.
Hosts who rely on the short-term rental market for income are angry at state and local governments who are cracking down on sites such as Airbnb as they fear being caught out by new taxes and regulations.
In Massachusetts, critics warn that the latest tax will have a detrimental effect on the state’s vital summer tourism season in places like Cape Cod; an argument which also applies in New Jersey.
In New Jersey itself, the state’s 130-mile long coastline is one of the state’s most prized resources, as its four counties along the shore accounted for more than $20 billion of the $43 billion spent in New Jersey on tourism in 2017, according to state officials.
The 11.6 percent tax surcharge applies to all rentals lasting fewer than 14 days, including those made on home-sharing sites or directly between a renter and an owner.
Despite the ongoing frustration from renters and homeowners, Airbnb frames the tax as an official recognition of its legitimacy, thereby putting the company on equal footing with the hotel industry.
Josh Meltzer, public policy officer for Airbnb in the Northeast, said: “Home sharing is bringing economic opportunity to families and businesses in every corner of the Garden State. We are excited to be able to support core state and local services from Jersey City to the Jersey Shore.’’
New Jersey and other states are struggling to ensure that newer e-commerce companies like Airbnb abide by the same regulations that apply to more established businesses, said Kim Rueben, a senior fellow at the Tax Policy Center.
Reuben said: “As person-to-person rental has become a larger part of economy, states and localities are trying to figure out, ‘How do you go about collecting the taxes that are equivalent to what hotels collect?’ This is probably something that people were always supposed to pay and they just weren’t collected.”
Some homeowners and others on the Jersey Shore are fighting back by forming a group, the NJ Shore Rentals Collection, to lobby lawmakers into excluding shore rentals from the tax.
Duane Watlington, vice president of the coalition, said: “The vast majority of the Jersey Shore are homes that were rented out long before the sharing culture that’s developed with Airbnb. We believe that if the unintended tax is not corrected, there will be less money spent on vacations, further exasperating the need for tax revenues.”
Many short-term rentals are also located in northern New Jersey, where visitors to New York City often seek out cheaper lodging.
Of the $133 million earned by Airbnb hosts in the state in 2018, over half came from the three northern counties closest to New York.