Accommodations tax inequity just plain wrong

November 19, 2021

There’s been a lot of finger-pointing recently among Sussex County Council members related to the 3 percent accommodations tax levied on rentals of hotel, motel and tourist home rooms. When the dust settled, two things became clear.

First, the tax does exist, and it was (rightly) suspended during the economic distress caused by the pandemic, but it has since been reinstated and is again being collected. Second, the controversy again spotlighted the unfairness issue regarding room tax collections on hotels, motels and tourist homes, but not on rooms rented via online organizations like Airbnb and VRBO.

That inequity creates an unfair advantage for online rental business and is just plain wrong. The problem should be addressed immediately with legislation at the county and state levels, because the inequity exists at both. Hotels and motels are required to pay an 8 percent state accommodations tax, while no such tax exists for online short-term rentals. For the same exact kind of transaction – rental of overnight rooms – one segment of business pays the tax, but another doesn’t.

According to reliable information gleaned from the internet, Delaware is one of only two states in the country that doesn’t charge taxes for online room rentals. This amounts to millions of dollars of unrealized revenue being left on the table. It makes no sense.

Accommodations taxes help support state-provided recreational infrastructure – such as beaches and parks – that so many welcome out-of-staters come to Sussex and Delaware to enjoy. This infrastructure doesn’t take care of itself.

There was a time during the height of the pandemic crisis when occupancy rates were way down in Sussex County, and suspension of the accommodations tax to help struggling businesses was the right thing to do. But now, occupancy rates have rebounded to even higher levels than pre-pandemic.

Sussex County and Delaware need to make addressing this inequity a high priority not only for fairness, but also so we can continue to maintain and improve the prized public resources supporting the quality of life enjoyed here by residents and visitors.

  • Editorials are considered and written by Cape Gazette Editorial Board members, including Publisher Chris Rausch, Editor Jen Ellingsworth, News Editor Nick Roth and reporters Ron MacArthur and Chris Flood. 

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