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Lewes may seek authority to tax hotels, motels

Officials: No immediate plans to impose tax
October 15, 2019

Following the lead of Rehoboth Beach and Sussex County, Lewes Mayor and City Council has directed its solicitor to draft a charter amendment giving city officials the authority to impose a tax of up to 3 percent on hotels, motels and tourist homes.

Councilwoman Bonnie Osler said a charter change does not mean council will immediately impose the tax.

“I don’t think we’re talking at this point about a tax or even what it would be,” she said.

The state already has an 8 percent state lodging tax on hotels and motels – 5 percent goes to the state’s general fund; 1 percent goes to beach replenishment; 1 percent goes to the State Tourism Office and the remaining 1 percent is split among county tourism offices. If Lewes were to impose its tax in addition to the state’s, all of its resulting revenue would go to the city.

Deputy Mayor Fred Beaufait cautioned council that changing the charter will make it very tempting to impose the tax.

“I have to say as sure as I am sitting here that if we put it in the charter, it will be a very short time before we impose it,” he said. “I know enough about humankind that in a year or two we’ll be imposing the tax. Just wait for the first time we have trouble balancing our budget.”

The tax would not affect residential rentals, whether through a realtor or companies like Airbnb. That is covered by a 3 percent gross rental receipts tax. Mayor Ted Becker said the city collects about $510,000 in revenue from that tax, nearly 10 percent of Lewes’ budget.

Because the gross rental receipts tax is collected via an honor system, Becker said, it’s difficult to determine the level of compliance. He said city staff has met with companies that claim to have the technology to identify homes that are not complying. The issue will be considered for council approval at a future meeting.