Which rentals should include sales and occupancy tax charges?

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Q. My wife and I will be visiting New Jersey several times a year with each stay being four weeks or more. When researching extended stay hotels, New Jersey sales and state and local occupancy taxes apply, which can be 14%. Do these taxes also apply if we are able to stay at a location that requires a signed lease?
— Traveler

A. We’re glad to hear you’ll be spending some time in the Garden State.

A few things come into play.

First, the signed lease is not the key factor in determining whether your stay will be subject to New Jersey sales tax and the various other occupancy taxes levied by the state and different municipalities, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

He said the trigger to these taxes is based on several other factors, including whether you’re renting the property directly from the owner through a broker or other facilitator such as Airbnb or VBRO, whether there are services provided such as cleaning and linens, and the length of your state.

“In New Jersey, if you are renting a property through a broker or online facilitator as a short- term vacation rental for under 90 days, the sales and occupancy taxes are assessed,” Gallo said. “However if you are renting directly from an owner where no services are being rendered — you are simply picking up the keys and you are on your own — regardless of the length of stay, no sales tax is charged.”

Gallo said the premise for the rules is that if services are rendered, then it is no longer simply a rental, and therefore all the taxes are due and payable. But if you are staying longer than 90 days consecutively, even if services are rendered, you are no longer liable for sales tax.

“The same logic applies in New Jersey where if you buy a quarter pound of chop meat at a grocery store there is no sales tax, however, if you purchase a quarter pound hamburger at McDonald’s you are charged sales tax because of the service provided to cook and serve the hamburger.”

Gallo said if you are looking to save on the sales tax, try to rent from a property owner directly with no services provided or extend your stay beyond 90 days.

Good luck with your plans.

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This story was originally published on May 19, 2022.

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