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The Jersey Shore, a storied summer vacation spot, has become the newest national battleground over regulating and taxing the internet economy.
New Jersey is one of the first big states to adopt a surcharge on short-term rentals — a so-called Airbnb tax. It kicked in Oct. 1 and is causing vacationers to rethink their summer travels and stirring anxiety among the homeowners who rely on them.
The fallout over the 11.6 percent tax has inserted New Jersey into a broader debate as states and communities grapple with the explosive growth of the online home-sharing economy. A patchwork framework of local ordinances has failed to keep pace with the rapid rise of Airbnb, the largest home-sharing site, which was valued at $31 billion two years ago and has upended the rental market around the world.
Much like Uber’s dominance has caused a regulatory challenge for cities and Amazon’s ascent has prompted states to adopt internet sales taxes, the popularity of Airbnb has begun to push lawmakers to impose new rules even as they find ways to tap the enormous revenue it generates.
Massachusetts also recently passed a statewide tax on short-term rentals aimed at Airbnb and other home-sharing sites; a proposal to increase the sales tax on similar rentals has been introduced in Colorado.
In New York City, Airbnb and local officials have been at war over efforts to crack down on the industry. A federal judge blocked a law in January that would have required Airbnb to provide detailed information about listings and hosts, and the city recently filed a lawsuit against a group of real estate brokers, accusing them of using Airbnb to illegally rent out dozens of apartments.
State and local governments that have moved to rein in Airbnb and other home-sharing sites have set off alarm bells among those whose economic survival is tied to the short-term rental market and who are angry that they are being ensnared by new taxes and regulations.
In Massachusetts, critics warn that the new tax will wreak havoc on the state’s vital summer tourism season in places like Cape Cod. The same arguments are being put forth in New Jersey.
Vacationers are abandoning long-held traditions and heading elsewhere.Homeowners complain they are having a hard time filling properties when they should be well on their way to being fully booked for summer. And businesses that rely on free-spending summer visitors fear that the rental tax threatens their most important time of year.
Susan Hiller said she was heartbroken to be heading to Palm Beach, Fla., with her four daughters and extended family for their annual summer vacation.
While the groomed white sand and glassy teal waters of the exclusive locale are a siren song for vacationers, beckoning even President Trump, Ms. Hiller said it is just not the same as the Jersey Shore.
“I’ve been going to Ocean City since I was 5 years old and I’m 51,” said Ms. Hiller, who lives outside Philadelphia. “It is truly my most favorite place on earth.”
George Triebenbacher, 56, grew up on Long Beach Island in New Jersey and now owns seven properties there that he’s been renting out since 2010. His weekly rates vary — three homes rent for $1,650, three go for $5,500 and a larger home fetches $10,000.
In past years, by this point in March, all his homes had typically been reserved for the summer. But this year, about one-fourth of his rental weeks are still available, he said, and some people who had initially reserved are backing out.
“People are actually canceling and forgoing deposits to get away from the taxes,” he said. “There’s no question that there’s all kind of upheaval being created by this tax.’’
Debbie Mozer, 60, who owns a souvenir shop in Beach Haven, said summertime sales are crucial to her bottom line. “Everything depends on our sales for the summer,” Ms. Mozer said. “This is how we make our living.”
The 130-mile long New Jersey coastline is one of the state’s most prized resources. The four Jersey Shore counties accounted for more than $20 billion of the $43 billion spent in New Jersey on tourism in 2017, the most recently available data, according to state officials. When the Trump administration unveiled a plan to drill for oil off the New Jersey coast, opposition to the proposal unified politicians of all stripes, from the progressive Democratic governor, Philip D. Murphy, to a conservative Republican representative, Chris Smith.
Passage of the short-term rental tax flew largely under the radar last summer, overshadowed by the battle between Mr. Murphy and Democratic legislative leaders over a different tax — on the wealthy — that nearly shut down the state’s government.
But now many along the shore say the rental tax places one of the state’s main summer economic engines in its crosshairs. The 11.6 percent tax applies to all rentals fewer than 14 days, including those made on home-sharing sites or directly between a renter and an owner. The only exceptions are rentals arranged through a realtor, which are not subject to the tax.
John Brennan owns a home on Long Beach Island that he is listing on Airbnb for $2,200 a week. By late winter he said he typically has 70 percent of the season booked. But so far, nothing has been rented. “They can’t just keep taxing us,” he said.
Though it has frustrated renters and homeowners, Airbnb frames the tax as official recognition of its legitimacy, putting the company on equal footing with the hotel industry.
“Home sharing is bringing economic opportunity to families and businesses in every corner of the Garden State,” Josh Meltzer, who oversees public policy for Airbnb in the Northeast, said in a statement. “We are excited to be able to support core state and local services from Jersey City to the Jersey Shore.’’
The controversy over the tax underscores how New Jersey and other states are struggling to ensure that newer e-commerce companies abide by the same rules that apply to more established businesses, said Kim Rueben, a senior fellow at the Tax Policy Center, a nonpartisan research group based in Washington.
“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?’” Ms. Rueben said. “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, forming a group, the NJ Shore Rentals Coalition, to lobby lawmakers and Mr. Murphy to exclude shore rentals from the tax. A bill that would do that has been unveiled in Trenton, though it is unclear if it has enough support to pass.
“The vast majority of the Jersey Shore are homes that were rented out long before the sharing culture that’s developed with Airbnb,” said Duane Watlington, vice president of the coalition. “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.”
The Murphy administration has signaled that it would consider revising the tax to ease the burden on the Jersey Shore.
“The administration stands ready to work with the Legislature to amend the law to more closely mirror the intent of our original budget proposal,” said Jennifer Sciortino, a spokeswoman for the state Treasury Department.
Much of the anger around the new tax has come from the Jersey coast, but many short-term rentals are concentrated in northern New Jersey, where visitors to New York City can find cheaper lodging.
Of the $133 million earned by Airbnb hosts in the state in 2018, more than half came from the three northern counties closest to New York. The four shore counties accounted for $48 million, though the majority of rentals there are condensed around the three-month summer season.
Maria Vitale, who has rented out her home in Lavallette for nearly 10 years, is charging the same weekly price, $2,400, as last year, but said many would-be renters had been turned off by the additional $280 in taxes.
“New Jersey people, we’ve been taxed enough,” she said.
The tax is taking hold at a time when the coast is still not fully recovered from Hurricane Sandy, Ms. Vitale noted. Still, there are signs of optimism: Her kitchen is being used less, she said, as renters seek out restaurants that have begun to reopen after the devastating 2012 storm.
“Knowing what the Jersey Shore went through six-plus years ago,” she said, “I don’t think this is the opportune time to tax them even more.”