In 2005, New Jersey implemented a 5% Occupancy Tax on overnight stays in hotels, motels, and bed and breakfast inns. This tax was established to support tourism, the arts, and historical programs. Municipalities can add up to 3% to the state fee to further support tourism within their communities. The total tax on lodging, including sales tax, cannot exceed 14%. The responsibility for collecting this room tax falls on hoteliers.
Cape May County ranks second in New Jersey for occupancy tax collection, generating $23,066,528 in 2024, just behind Bergen County, which collected $24,224,494. However, the formula used to distribute funding among the three entities—Tourism, Arts, and History—is flawed and does not comply with the allocation guidelines established by law. More than $21.6 million in Occupancy Tax collected in Cape May County is being used to support programs in other counties or is diverted into the general fund, deviating from the original intent of the law.
Despite having the highest occupancy tax collection, Bergen County receives the smallest percentage of return at 5.72%, which amounts to $1.38 million. Cape May County, with the second-highest collection rate, receives a slightly higher percentage of 6.07%, totaling $1.40 million available for Tourism, Arts, and History through a grant process. Ironically, both counties lead in collection but receive the lowest percentage return for their efforts. Eight counties receive more funding than both Bergen and Cape May County and generate far less in Occupancy Tax.
Some counties receive more than 100% of what they generate in Occupancy Tax. For instance, one county received $9 million in grant awards, nearly 114% more than it generated. Of the 21 counties receiving grant funding from the Occupancy Tax, there is another group identified as "other," which consists of entities from outside New Jersey that generate no Occupancy Tax revenue. In 2024, these organizations were awarded $1.967 million in grants, surpassing the funding received by 19 New Jersey counties that do generate Occupancy Taxes.
The total statewide collection for 2024 was $195,399,919, and approximately $81.5 million was allocated through grants for Tourism, Arts, and History. There is a growing coalition of tourism groups headed by Cape May County Commissioner Director Leonard Desiderio, Cape May County Department of Tourism, and County, and Local Chambers of Commerce that are increasingly concerned about the funding formula and the lack of fairness in its distribution.