Key Issues

Hotel Occupancy Tax

In 2003 the industry, in concert with the Arts, History and Cultural communities worked cooperatively with the state to create a stable, recurring, NEW revenue source for these efforts by enacting the Hotel Occupancy Tax.  The tax was enacted to:

  • Generate funding for the Office of Travel and Tourism’s  promotional, advertising and cooperative marketing activities
  • Set forth an initiative to grow revenue to contribute to the economic stimulus of the state
  • Fund cultural and historical grants and programs
  • Allow municipalities to add a new source of revenue generation other than the property tax
  • Give the State a share of the funds for general use
  • And once and finally stabilized the funding mechanism for an industry that largest by guaranteeing a minimum funding level and, if breached, trigger the repeal of the tax


Notice of Receipt of and Action on Petition for Rulemaking Sales and Use Tax

Amend Definition of Hotel; New Definition of Transient Room Rentals; New Definition of Transient Occupancy N.J.A.C. 18:24-3.2

Petitioner: Greater Wildwood Hotel-Motel Association

Take notice that on October 8, 2009, the Department of Treasury, Division of
Taxation (Regulatory Services Branch) received a petition for rulemaking from
Barry, Corrado, Grassi & Gibson, PC on behalf of the Greater Wildwood Hotel-Motel Association seeking to amend N.J.A.C. 18:24-3.2. This rule currently limits the scope of “hotel,” thereby excluding from the application of sales tax sales of certain types of transient rentals. The petitioner seeks an amendment of the existing “hotel” definition and the addition of “transient room rentals” and “transient occupancy.” The Department has determined to deny the petition for the reasons set forth below:

1. The petitioner requests that the definition of “hotel” include all types of
real property “made available to the public on a transient basis” regardless of
any services or amenities offered by the owner or manager of the property. The
Division has consistently interpreted the definition of hotel narrowly as to
limit the application of sales tax to occupancies rather than real property
rentals. The petitioner’s request to expand the definition would not provide
clarity to the industry but would expand the imposition of sales tax to a wide
range of transactions that are not currently taxed under the Sales and Use Tax
Act, N.J.S.A. 54:32B-1 et seq.

The Division recognizes, however, that manner in which the hotel industry
operates has evolved over time and feels that an expansion of the “hotel”
definition found in N.J.A.C. 18:24-3.2 would be helpful to the industry and
taxpayers alike. The Division is currently drafting a regulatory proposal that
it plans to publish shortly.

2. The petitioner requests that the rule be further amended to define two new
terms, “transient room rentals” and “transient occupancy,” as any room rental
of less than 90 days duration. The sales tax imposition found in N.J.S.A.
54:32B-3(d) provides for sales tax on the “rent for every occupancy of a room
or rooms in a hotel in this State,” and carves out an exception for permanent
residents, which are defined as “any occupant<<-s->> of any room or rooms
in a hotel for at least 90 consecutive days.”N.J.S.A. 54:32B-2(m).

As all occupancies in hotels less than 90 days in duration are taxed under the
imposition outlines above, creating a label for all taxable occupancies is

In determining whether a facility operates as a hotel, the Division currently
looks at a number of factors, including whether a facility is open to
transients. This is not intended to define the type of occupancy, but to assist
the Division in fleshing out whether the facility acts in a manner that is
consistent with its interpretation of “hotel.” A reference to this approach can
be found in the Division current rules. The Division’s regulatory proposal that
will be published shortly will address more specifically the Division approach
to determining whether a facility to be operating as a “hotel.”

In accordance with N.J.A.C. 1:30-4.2 and 18:1-2.3(b), the Department has
mailed to the petitioners a copy of this notice of action.

42 N.J.R. 92(a)


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