The “sharing economy” has become a feature of daily life for millions of people around the country and in New Jersey. It primarily consists of technology companies that use mobile apps to allow people, at least in principle, to make certain exchanges. Two well-known types of sharing economy services are ride-sharing and home-sharing. These particular business models frequently conflict with established local businesses and local regulations. Ride-sharing companies like Uber and home-sharing companies like Airbnb have often resisted efforts by local governments to regulate them as taxi and hotel companies, respectively. A pair of bills pending in the New Jersey Legislature would impose regulations on home-sharing services. While not expressly classifying them as hotels, the bills would subject them to similar rules and taxes.
Home-sharing services allow homeowners to make their homes available for short-term rental. The home-sharing service acts as a sort of broker between users and homeowners. This type of service has managed to avoid many of the legal pitfalls that some ride-sharing companies have encountered, such as questions of whether drivers are independent contractors or employees. Where home-sharing companies have found trouble, however, is on the question of whether they should be regulated and taxed as hotels.
Hotels, motels, “bed & breakfast” operations, and other businesses providing overnight accommodations are subject to a variety of state and local regulations. New Jersey law imposes a seven percent State Occupancy Fee on rental rates charged by hotels and motels across the state. Most municipalities in New Jersey are also authorized to collect a Municipal Occupancy Tax of up to one percent of rental rates.