State tax on beach rentals now in effect

As the 2025 beach season approaches, a new state tax awaits those looking to book an Airbnb, Vrbo or other types of short-term rentals.

Signed into law by former Gov. John Carney in 2024, the law places a 4.5% state tax on short-term rentals. The bill defines a short-term rental as a house, duplex, multiplex, apartment, condominium, houseboat, trailer or other residential dwelling unit where a tourist or transient guest rents sleeping or living accommodations for no more than 31 consecutive nights. Hotels and motels are excluded from the tax.

The law went into effect Jan. 1, and this beach season will be the first in which the state tax will be added to a rental bill. Sussex County is allowed to add its own 3% tax under the law, but in December, council defeated a bill to do so.

Other local municipalities can also add their own rental taxes, which they collect under their own terms.

For the state tax, the Division of Revenue collects the money.

Anyone renting a short-term rental property must get a $25 Delaware business license, except those using accommodation intermediaries such as Airbnb, Vrbo, Booking.com, Expedia, TripAdvisor and other rental listing companies. In those cases, the accommodation intermediaries must obtain a license. A license must be obtained before doing business, and can be found at onestop.delaware.gov.

When asked whether Airbnb, Vrbo, Booking.com, Expedia, TripAdvisor or any other rental listing company had obtained a license, Division of Revenue Executive Assistant Bobbi DiVirgilio provided a Delaware business license search page to look up license information.

A check May 29 showed licenses for AirBNB, Vrbo, and Expedia. 

Property owners not using an accommodation intermediary must get their own license under the law.

“With respect to enforcement, the Delaware Division of Revenue will be using a variety of audit tools and information to ensure all owners of short-term rental property meet their legal obligation,” DiVirgilio said.

The tax is collected by final payment or occupancy of the rental, and if a property owner is using an accommodation intermediary, the intermediary is responsible for collecting the tax and submitting it to the Delaware Division of Revenue, according to the state.

Otherwise, the property owner is required to collect the tax and submit it to the Division of Revenue’s online taxpayer portal by the 15th of the month following the month of collections, according to the state.

Taxes filed late are subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid. In addition, officials say, a penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return. Accommodation intermediaries are subject to interest and penalties for failing to file any required tax return, filing incomplete tax returns or failing to remit data required by the Division of Revenue.

If a short-term rental stay is canceled in whole or in part, the canceled portion of the stay is not subject to the short-term rental tax, and any amount of tax collected for such canceled portion must be refunded, according to the state.

For more information on the short-term rental lodging tax, go to revenue.delaware.gov/info/tims.