Delaware 3% Lodging Tax

On July 7, 2019, Delaware passed a bill – HB228 sponsored by State Representative Pete Schwartzkopf (D. DE-RD-14) and co-sponsored by State Senator Ernie Lopez (R. DE-SD-6). House Bill 228 gave Sussex and Kent Counties the authority to enact a new 3% lodging tax on hotels, motels, and tourist homes in unincorporated areas of the County. Newcastle County already had the 3% lodging tax in place since 2018.

On July 17, 2017, Delaware passed State Bill SB86 to allow the City of Rehoboth Beach to amend its charter to be able to apply the County 3% lodging tax within City limits. State Bill SB86 was sponsored again by State Senator Ernie Lopez and State Representative Pete Schwartzkopf.

At its November 12, 2019 meeting, Sussex County Council voted 5:0 to impose a new 3% lodging tax on hotels, motels, and tourist homes in unincorporated areas of the County as pre-authorized by DE State Bill HR228 which passed at the State level on July 7, 2019.

The new 3% Lodging Tax will take affect at the Sussex County and City of Rehoboth Beach Municipality level January 2020.

It is the clumsily worded, “Tourist Homes” together with the blending of levels of administrative structures: State, County, and Municipality that has confused us all! Put simply State level Bill HR228 allows for the County to apply the tax. The City of Rehoboth Beach changed its charter using State level Bill SB86 to allow the City to apply the tax. Newcastle County already had the tax in place.

The verbiage of Bill HR228 refers to Section ยง 6101 of Delaware Code Title 30. State Taxes which defines a Tourist Home as, “…any person who operates a place where tourists or transient guests, for a consideration, may obtain sleeping accommodations and which has at least 5 permanent bedrooms for the use of tourists or transient guests, but which does not have cooking facilities for the use of tourists or transient guests.”

So, what we glean from this confused coverage? Vacation rental properties if they have cooking facilities (kitchens) then they’re exempt from this 3% Lodging Tax. If a vacation rental property has less than 5 bedrooms? They’re exempt from this 3% Lodging Tax regardless of cooking facilities (kitchens). Currently there is no State or County level tax on vacation rentals.

Read the comments by hotel owners and some County Council members in the press coverage that one can find with a simple Google search. While there is not currently a State or County tax on vacation rentals (Delaware is one of the few states not to have a vacation rental tax), expect this to re-surface at some point. In fact State Representative, Deborah Hudson (R. DE-RD-12) introduced a bill, HB130 in 2017 that proposed extending the State accommodation tax of 8% to vacation rentals. The Bill never made it out of committee. While there does not seem much appetite at the State level currently for a vacation rental tax, and even though Sussex County’s budget is running a surplus, the size of the vacation rental industry at the Delaware Beaches is just too large and involves too much money for State legislators to not want a piece of. Factor in the very powerful hotel lobbies and the voice of residents who do not want vacation rentals in their back yards, well, watch this space…

Seachange Vacation Rentals monitors the vacation rental industry at the Federal, State, and local level to ensure that our radar picks up anything that may impact us as vacation rental property owners and managers. If you see anything, then please send us the tip and we will look into it.

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Seachange Vacation Rentals
Rental Office: 20 Baltimore Avenue, Unit 1
Rehoboth Beach, DE 19971, USA
Rental Office Telephone: (302) 727-5566

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