The Delaware General Assembly has passed House Substitute No. 2 for House Bill No. 168, as amended by House Amendment No. 1, aimed at revising lodging tax regulations. This bill introduces a short-term rental lodging tax, impacting platforms like VRBO, Airbnb, and similar services, as well as property owners who rent out their spaces directly without using these platforms.

 

Key Provisions

 

License Requirements and Fees:

The bill mandates that "accommodations intermediaries," defined as entities facilitating short-term rentals, must obtain a license with a $25 fee. This includes platforms like VRBO and Airbnb.

 

Property owners who solely use third-party intermediaries for renting their properties are exempt from being classified as accommodations intermediaries.

 

Owners who do not use intermediaries must obtain the same accommodations intermediary license and are responsible for collecting and remitting the lodging tax.

 

Short-Term Rental Definition:

A short-term rental is defined as any residential dwelling rented for no more than 31 consecutive nights. This includes houses, apartments, condos, and other similar properties.

 

Exclusions include hotels, motels, tourist homes, dormitories, healthcare facilities, campsites, and rentals directly arranged by the owner for no more than 10 nights a year at substantially below market rates.

 

Lodging Tax Implementation:

A new 4.5% lodging tax on the rent collected for short-term rentals is imposed.

 

This tax is to be collected by the accommodations intermediary unless a contractual arrangement specifies otherwise.

Property owners who rent directly without using intermediaries must also collect and remit this tax.

 

Tax Collection and Remittance:

Accommodations intermediaries and direct-renting property owners are responsible for collecting and remitting the short-term rental tax to the Delaware Department of Finance.

 

The tax must be remitted monthly, with interest charged on late payments.

 

Data Reporting Requirements:

Accommodations intermediaries must report various data to the Division of Revenue, including the address of rental units, the number of nights rented, and aggregate rents collected.

 

They must also display their license number on all marketing materials and provide necessary data to enforce the new regulations.

Direct-renting property owners must comply with the same reporting requirements.

 

Tax Distribution:

The revenue from the short-term rental tax is allocated as follows:

62.5% to the State General Fund.

12.5% to the Beach Preservation Fund of the Department of Natural Resources and Environmental Control.

12.5% to county-based convention and visitors bureaus.

12.5% to the Delaware Tourism Office.

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Local Lodging Taxes:

New Castle and Sussex counties are authorized to impose an additional local lodging tax of up to 3% on short-term rentals.

Funds from Sussex County’s local lodging tax are to be used for beach nourishment, waterway dredging, economic development, tourism, recreational activities, water quality, and flood control projects.

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Implications for Delawareans

For property owners and hosts using platforms like VRBO and Airbnb, this bill introduces new licensing and tax obligations. They will need to ensure compliance with the new tax collection and remittance procedures to avoid penalties.

 

For property owners who rent directly to guests without using intermediaries, they must now obtain a license, collect, and remit the lodging tax, and report the necessary data to the state. This adds a layer of responsibility and administrative work but is crucial for compliance with the new law.

 

Guests may see an increase in the cost of short-term rentals due to the additional 4.5% state lodging tax and potential local taxes. However, the revenue generated from these taxes is intended to support state and local tourism initiatives, environmental preservation, and economic development projects, which could ultimately benefit the community and enhance the state's appeal as a tourist destination.

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While the new bill imposes additional financial and administrative responsibilities on short-term rental hosts, both those using intermediaries and those renting directly, it aims to provide broader benefits through improved state funding and support for tourism and environmental projects.